Here is presented the information on different types of tokens issued through ICOs. Their functions are divided into three groups which will be described below.
The growing hype around ICOs gives a reason to provide some information on the different types of tokens which have to be paid attention to when choosing the right project to invest. Tokens started flourishing all of a sudden and all of them had a wide range of functions.
The initial surge of ICOs seems to have died out now. Investors are now less reckless and more picky about the projects they choose to fund. Blockchain startups are now coming up with new kinds of tokens promising appropriate investor protection.
With the abundance of different tokens, it is rather hard to put them into a strict classification system. We can, however, try to divide them into three broad categories:
- currency tokens;
- utility tokens;
- security tokens.
Currency tokens are your regular cryptocurrencies, such as bitcoins, litecoins and so on. They act as a means of payment. These tokens usually have their own dedicated blockchains. A currency token is valuable both within its network and beyond. Ethers, for example, can be used to pay for dapps or to buy goods and services outside the Ethereum platform. Currency tokens are intended to be an alternative medium of payment.
Utility tokens provide access to goods and services within its network. They do not necessarily have to have their own blockchain. Ethereum allows startups to use their blockchain, and users will then can convert their ethers into specialized tokens. Utility tokens work much like tokens in an amusement park. You buy tokens with your real money to get a roller-coaster ride. Similarly, you buy tokens from an issuer to gain access to the products or services it provides. For example, a holder of filecoin tokens has access to Filecoin’s decentralized cloud storage. A utility token is an important part of a service and contributes to its functioning.
Security tokens come in various forms. A dividend token grants entitlement to dividends or interest payment. An asset token represents ownership of an asset, such shares of a company. Some security tokens also give their holders rights to vote on the company’s decisions. Lottery.com, a mobile lottery service, now accepts applications for their STO (Security Token Offering), promising token holders financial yields depending on the gross raffle sales.
Goldmint are now tokenizing gold assets, which, they are confident, will make gold easier to buy and sell. Nexo.io, a crypto-backed loan service, distributes 30% of their profits between their dividend-token holders. Other projects may be giving out routine passive income to those who hold their tokens.