Utility Token

While coins such as ETH (Ether) or BTC (Bitcoin) are based on their own blockchain, tokens use existing platforms as a basis, which is also the difference between a coin and a token. In order that a token without its own blockchain can be created at all, so-called smart contracts are required in order to (put it extremely simply) implement the set of rules and the interaction with this blockchain. The smart contract standard ERC-20 has emerged as the main standard for fungible token implementations on the Ethereum blockchain. 

A utility token is by its nature a fungible token which, in comparison to "non-fungible-tokens", is interchangeable and not-unique. A utility token can be seen as a type of exchange or resource that guarantees certain functionalities, voting rights or access to blockchain projects.

A utility token is also a fungible asset that can be used to access exclusive products or services, as well as for payment or voting. In many cases, utility tokens are used to fund blockchain projects. By purchasing a token, you then receive predefined rights. For a crypto project or a platform itself, this is a possible form of getting support and investment from the community.

Utility tokens are also used for staking and liquidity mining. With token staking, users buy or use existing utility tokens, which are then frozen (staked) for a period of time.

Furthermore, utility tokens are suitable for the implementation of loyalty programs. As with many other retail loyalty programs, customers who make online purchases or take part in special offers receive points in the form of tokens that they can collect and later exchange for discounts or even directly to buy new goods.

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