Utility Token

Understanding Utility Tokens

A utility token is a type of token that has a specific purpose in facilitating the use of a particular product or service. These tokens are only used within the ecosystem they are created for. For example, in the future, Uber may introduce its own utility token that customers can use to pay for rides on their platform. It is important to note that utility tokens are not meant for investment purposes.

The Securities and Exchange Commission (SEC) closely monitors both utility tokens and security tokens. The SEC uses the Howey Test to determine the classification of a token. This test helps differentiate between security tokens and utility tokens. Unlike security tokens, utility tokens are not subject to the same regulations and requirements because they are not considered investment contracts. A well-known example of a utility token is Filecoin, which is specifically designed to facilitate the usage of the Filecoin decentralized data storage platform.