There are many, let’s see.
Due to the cryptocurrency boom, the terms “token”, “coin”, “initial coin offering” (ICO) and many others have become an integral part of the vocabulary of every trader and investor. Their use, however, is often shrouded in uncertainty and confusion.
Here are the differences between the main types of tokens.
Currency tokens. As the name suggests, these are tokens used as a form of payment and a store of value which can be retrieved at a later time. Arguably, this makes them identical to “coins” like Bitcoin and other cryptocurrencies.
Utility tokens. The advent of Ethereum created what became known as “utility tokens”. Unlike currency tokens, this type of token gives holders access to products or services within a particular platform or network. Utility tokens are multi-functional – they typically “reside” on top of a given Blockchain such as Ethereum, and for the most part, can be used within their respective network.
Securities tokens. In addition to allowing holders to purchase goods and services, securities tokens often promise investment returns and value appreciation. This quality was a reason for some market participants and regulators, most notably the US Securities and Exchange Commission (SEC), to classify them as securities. As such, they constitute an investment contract and have the potential for profit, passive income and dividends.
Asset tokens. Asset tokens serve as a digital representation of an asset in an organization or platform.
Equity tokens. More of a theoretical than practical concept right now, these tokens give their holders an ownership share in the issuer’s capital, pretty much like stocks do.
Reward tokens. Most commonly, these are the Blockchain equivalent of loyalty points or other reward programs.
Then there are “dividend tokens”.