In the world of cryptocurrency, tokens are a fundamental concept that represent value or assets within a blockchain ecosystem. However, not all tokens serve the same purpose. The distinction between utility tokens and security tokens is crucial for understanding how each functions within its respective network. These tokens are used for a variety of roles, from governance and transaction facilitation to serving as a store of value.

Important: A utility token typically provides access to a product or service within a specific blockchain ecosystem, while a security token represents ownership of a real-world asset or equity in a company.

Tokens are typically categorized as:

  • Utility Tokens: Provide users with access to specific features or services within the network.
  • Security Tokens: Represent ownership stakes, profits, or shares in an underlying asset or project.

Below is a comparison of the main characteristics of these two types of tokens:

Feature Utility Token Security Token
Purpose Access to services or products Ownership and equity representation
Regulation Less regulated Subject to government regulations
Example Ethereum (ETH), Binance Coin (BNB) Polymath (POLY), tZero