What is a Utility Token? - Crypto in Plain English - Episode 263 - by cryptohunt.it

What is a Utility Token?

Welcome to the Cryptohunt Jam, where we spend one minute a day to explain crypto. In plain English. My name is Christian Byza, Co-Founder of Cryptohunt.it and I am your host of this daily show.

Let’s talk about a special kind of token today: The utility token. What is it and do we really need another kind of token?

But first, a little detour into the world of tokens: A token is generally any crypto asset, and there are countless of them. Bitcoin is a token, so is Ethereum. Those two, specifically, are so-called native tokens. They act like the primary money on a blockchain. So just like the US Dollar is the native money in the United States, Bitcoin is the native token on the Bitcoin blockchain.

Utility tokens are different. Their purpose is NOT just to pay and get paid, or to incentivize people to operate the computers that are necessary to run blockchains. Their purpose is to provide a specific utility for a project.

Say, for example, you created a blockchain version of Instagram. People who get likes on their posts get tokens, and they can spend the tokens by liking other people’s stuff. Very simple, but it provides a utility by making social interaction reciprocal.

So - that’s a utility token. And sometimes things get complicated. What if someone bought your tokens from that Instagram clone to give their posts more likes? Suddenly you have a mini economy and utility blends into money.

You see: The lines get blurred in crypto, just as they do in the real world. But now you know what people mean, when they call something a utility token.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.