Utility tokens are commonly tokens that enables a proprietor to utilize an item or service. Security tokens are tokens that is managed by financial bodies, and thusly, alluring to institutional financial specialists. Nowadays more and more token become increasingly specialized.

The blockchain is developing pretty fast and together with it the tokens that represented the new world of decentralization. Nowadays we can find token that are created to have specialized function different than only a value purpose (example Bitcoin).In today’s article we are going to find out what are the differences between the two types of tokens that are emerging and these are utility and security tokens.

Utility token

What does it mean if you have a utility token? It means it that you can have access to a service or product a company produces. The concept of this type of tokens is their usage – the users should use the services and not just keep them. An example is the Filecoin that collected more than 257 million dollars in 2017 with the sale of tokens which grant access to platform of cloud storage.

The utility tokens are part of a larger product so the developers usually address to this type of sales as events for generation of tokens in contrast with the ICOs. There is a heated debate ongoing whether TGEs and ICOs are different products or not. We would have to wait to see the outcome.

Utility tokens: Some examples

Golem – A sort of net that enables individuals to lease computing power to other people.

Token of Basic Attention Token – a sort of token created for the purpose of advertising.

Filecoin –  cloud storage that is centralized.

Have you heard?

Golem collected 8.6 million dollars in less than half an hour during the initial coin offering.

Security token

If you can use the utility token, you can trade with the security ones. The name of the token resembles “securities”, a well-known financial term that represents an asset with a value that can be traded.

Security tokens can be company stocks, a right to vote and decide about the company’s operation, value unit or all of these. The main difference when compared to securities is that this security token is dealt with and operated with the help of smart contracts.

The interest in this type of tokens is huge and certainly this has many reasons: no middlemen in the trade, cost-effectiveness when creating and keeping them, and bigger transparency. This is due to the registering of the transactions in one decentralised ledger.

One of the major things to remember regarding these token is- they need to be in compliance with the financial regulations. Thus, the developers created the token offerings (STOs) where they take into account the institutional investors.

Utility tokens: Some examples

Polymath – created to be like Ethereum based on ST20 standard for tokens

Swarm – the aim is to assist the tokenization of real properties, agriculture and renewables.

Tokeny – a platform created to assist individuals start working with tokens

An interesting fact

If we take the securities, tokenize and place them on blockchain the industry will reach 1 trillion dollars.

What to expect

This is only the start of tokens getting increasingly specialised over the long haul. Different classes of token have appeared. Other tokens become a separate class such as Zcash, which is a privacy coin, as well as the decentralized coins.

There is tremendous buzz behind the security tokens and blockchain as they imply that institutional financial specialists are quick to get included. If this occurs, the entire business’s value could raise drastically. We are yet to see the development of these tokens.