What is a Utility Token?

"Digital cryptocurrency tokens are issued to fund the development of cryptocurrency and can be used to buy goods or services offered by the cryptocurrency issuer."

This is an explanation of Utility Token from the Merriam-Webster dictionary.

Utility tokens are non-concrete tokens that are made for crowdfunding purposes (such as KickStarter, GoFundMe). This means that the buyer from Utility Token has paid the issuer of money tokens that can be used to develop the product and can be redeemed by the buyer later.

Quoted from CoinDesk, blockchain startup increased by $ 5.4 billion through ICO (Initial Coin Offering). ICO is a process when utility tokens are issued and sold in crowdfunding. So why do many people (from taxi drivers, doctors, to bankers) buy these tokens that they can't touch or redeem for products / services?

Speculation and fear of losing are the reasons why many people buy and trade utility tokens. Although you cannot redeem utility tokens for goods / services, the holder can enter them in the crypto exchange (eg NYSE or Nasdaq) to buy and sell utility tokens. When buying a utility token in the hope of getting a positive result from the project, this will attract other people to pay a higher price for the same token. Other people will see how the price of utility tokens increases, so afraid that if you do not buy now they will lose the opportunity to buy utility tokens at cheap prices; therefore they also buy utility tokens at a higher price.

The price or value given to the utility token is derived from speculation, and price fluctuations continue as long as there are third parties who are willing to buy utility tokens at a higher price. Therefore, utility tokens have the potential to create and hold true value.