Utility Tokens vs Security Tokens

in #blockchain5 years ago

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I will be writing on the makings of utility and security tokens, I will as well distinguish between them for easy understanding of what makes each what they are.

The blockchain technology saw to the introduction of numerous cryptocurrencies which abound today. These cryptocurrencies are products enabling access into some blockchain projects.

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Utility tokens just as the name implies are user tokens which serves the functions of access and interaction with a given ecosystem. These tokens are used to interact with either an app or a blockchain platform. By being a utility token, they are not being bound or held by any law. Their value is determined by the utility the given projects creates. This can be seen in the value of some utility tokens in crypto market today where projects lack use case, the price of the tokens on exchanges gets to zero making investors lose their investment funds.

Security token on the other hand is tokens backed by tradeable assets or company’s valuation. These tokens are backed by the law before a company issues security, it has to be registered and reviewed under some government stipulated laws. Holding security tokens makes one a shareholder in such project as some security tokens offer shares to his holders. Each security token offered comes with a dividend peg, at the end of the day each company can decide to give back to their supporters a given percentage of their valuation this can occur quarterly or annually.

The reason why security token is better than utility tokens is government involvement which makes such projects to abide by the stipulated laws and carter for their investors. They can also serve as a means of passive income earning to those who invested in it. In a time like this, security token is the best investment option in cryptocurrency sphere to ensure one’s investment is secure and one can get benefit for their investment.

Official Links

Website: https://vc.fabainvest.com
Whitepaper: https://www.faba-white-paper.com/FABA.pdf
ANN thread: https://bitcointalk.org/index.php?topic=5067299.0
Telegram: http://t.me/fabaventurecapital

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