Security Token vs Utility Token

Security Token vs Utility Token

The Initial Coin Offering (ICO) is an innovative crowdfunding that helps new businesses so steer away from traditional early seed…

Dr. Clemen Chiang
Dr. Clemen Chiang

The Initial Coin Offering (ICO) is an innovative crowdfunding that helps new businesses so steer away from traditional early seed investment. It has raised a total of $3.25 billion this year, creating its first ripple of what analysts believe could be leading up to a multi trillion dollar industry. New companies go about raising their capital by putting the crypto tokens on a blockchain which is mostly on Ethereum and circulating them to purchasers for utility purposes through the ICO fundraising model. Tokens can be classified into two, utility & security, based on their function.

Utility Tokens

Most tokens are promised to be used as utility tokens in the future, once the Dapps or applications are launched. Meaning to say that the tokens can be used within the apps, usually to provide a means for payment. The value proposition in these utility tokens are that an increase number of users coupled with growing demand for services will lead to an increase in price. This has certainly happened for a few coins, such as Binance coin which has seen a tremendous raise in its price since its ICO inception. Binance con offers users a discount on the Binance exchange and also the ability to trade in BNB coins.

SPIKE tokens is an example of a utility token whereby it is can be used within the Spiking app platform, for transactions between users (also aspiring traders) and for mirroring the trades from the Whales (big traders of crypto) they follow. It is a promising token because of what the Spiking platform can offer — ability of users to follow the Whales’ movements to gain some insights on trade and mirror their trades.

Security Tokens

On the other hand, security tokens which the name implies is a form of security. A security is defined as a fungible, negotiable financial instrument that holds some type of monetary value. The most common form of securities is equity, which represents ownership interest held by shareholders in an entity (a company, partnership or trust), realized in the form of shares of capital stock, which includes shares of both common and preferred stock.

In conclusion, security tokens gives the holder ownership rights while utility tokens, like SPIKE, have concrete function inside the company’s platform. It’s not a surprise that cryptocurrency becomes the subject of government’s interest because of its decade-history and billions capitalization. Many industry observers believe that mainstream companies will one day issue shares through ICOs, either in place of or in addition to traditional public offerings.

By Azfarkhan, Creative Intern

Drawing from its successful and rich experience in the stock market since 2016, Spiking is expanding to cryptocurrency trading! With its unique and powerful trading tool and its AI robot Robobull, Spiking enables traders to easily find whales and mirror the trades automatically. At Spiking, we strive to help traders make better decisions and take the steps toward fulfilling their dreams of achieving financial freedom. Check out Spiking App, Top Grossing Finance App at App Store & Google Play.

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