What are Utility Tokens?
Utility tokens are a type of cryptocurrency that provide users with access to a product or service within a specific blockchain ecosystem. Unlike traditional currencies, utility tokens are not designed to act as mainstream money; instead, they serve a unique function within a decentralized network.
These tokens are often distributed through initial coin offerings (ICOs) or token generation events, allowing developers to raise funds for their projects while offering investors a stake in the ecosystem. A key characteristic of utility tokens is their usability; they can grant holders privileges, such as voting rights, discounts on services, or exclusive access to features.
Examples of well-known utility tokens include Binance Coin (BNB), which is utilized on the Binance exchange for trading fee discounts, and Ethereum (ETH), which powers decentralized applications (dApps) on its blockchain. Overall, utility tokens play a vital role in the functionality of their respective platforms, driving user engagement and ecosystem development.