When the blockchain technology appeared, nobody thought it would mean something more than a futile attempt of geeks to create an alternative to traditional currency. Since 2013 it has become more and more clear that it may even have the potential to replace traditional money. The investors started to include Bitcoin among the investable commodities.
Besides the traditional coins that should one day serve as a tool for everyday spending, another independent category emerged — tokens. Nowadays, we distinguish between utility and security tokens.
They both have their value and importance, but they are designed to serve different purposes.
Utility Tokens — The Credit to Spend
Utility tokens are not an investment option. They are used to fund the development of the cryptocurrency company, and they enable future access to the products and services offered by it.
The concept works similarly to pre-orders of video games. Customers buy it in advance, and when its creator releases the game, they receive a digital copy and other brand products for their support. The range of bonuses varies according to the spend sum of money. However, they do not become the owners of any share of the company, and they have no influence on its direction, nor they can receive the dividend. As soon as the project is running, the company sells the credit to those who want to use its services.
The perfect example of the utility token is the Basic Attention Token based on the Ethereum currency. Advertisers who want to promote their content buy space using the BAT tokens while users receive BAT for viewing it, and they can use them to purchase goods or services from the merchants involved in the ecosystem.
Security Tokens — The Investment for Future
Are you searching for long-term investment? Do you want to keep your money safe during the world economic crisis? In that case, the security tokens could be the right choice for you. They are similar to traditional shares traded on the bourse, and they function in the same way. The token owners possess the part of the company and receive dividends on a regular basis.
The company does not need to utilise Initial Public Offering as it can sell shares and voting rights via the blockchain protocol. The same protocol is also used to create a voting system enabling every investor to exercise the control over the company decision-making process directly.
What Should I Put My Money Into?
Both utility and security tokens have their place in the world of the blockchain. However, some analysts agree that the security tokens represent the future of token offerings. Unlike the utility tokens they might also offer access to the global network of investors.
The security tokens are generally more trustworthy as they are regulated by the US Securities and Exchange Commission. The risk of frauds is thus reduced to the minimum. Each company that aims to offer the security tokens must overcome a strict procedure and abide by strict rules including the check of the financial records.
The investment to the Security token costs money, and you need to consider it in the same way as the investment into any other stock. However, it is a long-term investment that might lead to higher profit in case the company gains value.
This material and the information in it should not be construed as an offer or as investment advice. This has been prepared for informational purposes only. You should carry out your own independent research before making any investment decision.
