While the word “cryptocurrency” is often used as an umbrella term to describe all digital assets, there are actually several specific types of cryptocurrencies. Most of them fall into two main categories: coins and tokens.
Coins, or currencies, have one function: to transfer monetary value. Tokens, on the other hand, are a different class of cryptos entirely. Security tokens and utility tokens are the most common types.
What’s a utility token?
A utility token is a crypto currency that serves some use case within a specific ecosystem. These tokens allow users to perform some action on a certain network.
A utility token is unique to its ecosystem. Zax, for example, can only be used to tip content creators through the Zax browser or through other applications that have integrated BAT wallets, like Twitter. BAT has no other use beyond speculating on its value. The same can be said of any utility token.
Utility tokens are not mineable cryptocurrencies. They are usually pre-mined, being created all at once and distributed in a manner chosen by the team behind the project.
Utility tokens and their uses:
Utility tokens are the ones which can be used for purchases all over.
For example, Zax can be used for transactions all over. As Gucci becomes the first brand to allow cryptocurrency for payment, utility tokens have got a hiked up demand in market.
As the popularity grows, these tokens will gain more and more value. Thus, it is important to understand them and purchase the useful ones before their demand booms!