Utility Token VS Security Token


Usage of Utility Token

There are dozens of possible use cases of utility tokens. A few common ways people use utility tokens include:

  • Voting:
  • Utility tokens give people the right to vote on upcoming improvement proposals on a dApp. Technically, if a utility token gives people this privilege, it's known as a "governance token." While every dApp has different rules for blockchain governance, one of these tokens typically represents one vote.

  • Gaming
  • Many blockchain-based games have utility tokens that can be used to buy in-game items like NFTs (non-fungible tokens). Also, these utility tokens often serve as a rewards mechanism in play-to-earn games like "Axie Infinity."

  • Crypto exchange perks:
  • Some centralized crypto exchanges (CEXs) like Binance, KuCoin, and Crypto.com offer utility tokens to reward holders with perks like discounted trading rates.

  • Tipping:
  • Utility tokens may serve as a dApp's built-in tipping mechanism. In addition to rewarding content creators, this function may influence the ranking of comments or videos on a social media dApp's main page..

  • Paying network fees:
  • People have to pay transaction fees using a smart contract blockchain's native utility token. For instance, people who want to use a dApp on Polygon have to use the MATIC token to confirm transactions.