Below, we will try to find out what is a utility token? It’s a specific kind of token helping in capitalization or financing of projects for new businesses, companies or groups of project creators. The UL token, which is called a service token, is used as a guarantee of taking part in large sales to attract investment in projects. These tokens make it possible to further access to products of enterprise. Such tokens aren’t classified as investments, since in many states there’s no legal basis for them.
Utility tokens crypto may be useful if a firm wants to create an exchange coupon being able then to be exchanged for access to services. Often this is necessary for a strategy for obtaining investments. Consequently, such tokens often have plenty of speculation. So this type of purchase has big risks.
Blockchain has utility tokens connected with structures being created, and ICO – is a means by which a cryptographic currency structure can receive the necessary funding for further progress. It is ICOs proffering digital means of new projects in exchanges for other cryptographic currencies or ordinary money being needed for final progress. It’s a great method of implementing cryptographic tokens as utility ones.
In turn, service tokens can be divided into 2 kinds – fungible and non-fungible. Fungibles are assets that can be exchanged for other assets of equal value. For example, the value of gold is determined by weight. Non-fungible tokens define exceptional holding, such as a piece of land. This type of coin is regulated by federal law, and if it is not respected, the operation of the entire project may cease. But covered by all regulatory provisions, investment tokens have potential to be used in several areas.
Implementation of UL-tokens with ICO
As described earlier, crypto-currency projects use ICOs to spread utility tokens to capital holders. But how is such a scheme realized?
- It starts when the creator of the project decides to conduct an ICO. The release of some number of tokens is announced.
- Token utility possesses a cost determined by firm. It’s done in order to receive the necessary amount for the development of the created project.
- The cost of a token is often static, but it also happens that the price may depend on demand. Also, ICOs are often held on platforms that already have the definition of Ethereum. This makes it easier to develop a token and conduct a high-quality ICO according to technical parameters.
Acquisition of these tokens takes place in various cryptographic currencies and even in fiat. An investor who is interested in the project pays money for the tokens he/she needs, and they will be assigned to this person. Purchased tokens are sent to an address controlled by the buyer. So, the buyer receives these tokens, and can use them to access new project services.
The acquisition of such tokens often makes profits: the cost of investing in them is several times less than the final price of the tokens. It is especially good if project achieves or even exceeds the set goals. ICOs and utility tokens are very commonly evolved throughout whole scheme.
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