Token Classification

Classification of tokens according to use-cases:

Classification of tokens according to use-cases:

Utility Tokens

Utility tokens are for dynamic uses in a particular ecosystem or project. Utility tokens are unique keys that give its holders access to a product, specific services, or special discounts. In simple terms, users might require a particular utility token to be free to perform certain things on a network. The top most use case for utility tokens is as pieces of software that can be used to transfer value. In example, specific tokens find uses during swapping on a decentralized exchange (DEX) or for different decentralized finance (DeFi) activities. It is also used for rewarding users of the platform in the form of loyalty program rewards or incentives. It even gets used for paying out interest to users who deposit funds in the platform and then lend to borrowers.

Security Tokens

Security tokens on blockchain represent digital assets that get their worth from a tradable outside asset and are often associated with a securities offering. Just as traditional securities, security tokens are also regulated by federal laws that rule security. The securities referred to here are often a portion or share of the token issuer’s company. This share exists as a type of investment in the technology company growth in the long run. Blockchain based security tokens also fall under the rules of financial regulators such as the Securities and Exchange Commission (SEC) in the US or any other government’s financial watchdogs for their country. One standard quality security tokens have their say in any decision of the company that issued them. A security token holder has some form of ownership of the company.

Hybrid Tokens

Hybrid tokens borrow elements of utility tokens and security tokens altogether. As of every utility token, a limited supply is created. These tokens can be used to unlock the utility from a network or decentralized application, thereby representing the means of exchange within a certain network.

The lack of utility for early token holders in such cases is mitigated by the additional potential for financial gains through the appreciation of a hybrid token’s value when the network becomes more widely adopted. As the name suggests, hybrid token gives its holders both economic and governing rights. This could take the form of additional profit rights or equity rights in the business. However, it might also take the form of a right to certain revenue streams within the project’s business model and ecosystem.

Hybrid tokens give equity-like characteristics such as governing rights, dividends and equity ownership while retaining the most important characteristic of utility tokens: increased demand of the token for ecosystem platforms leads to a direct increase in the token’s price. The economic rights attached to a utility token ensure that more traditional methods of valuation can be applied to figure out the true value of the token.

RPT is an example of hybrid token. It is native token for Rupto protocol and used for transaction gas, staking and governance as well as it also hold the value for asset security. Every RPT token is backed with physical property. Read More...

The hybrid token also results in a reduction of volatility while compared to utility tokens, which improves the user experience for those consumers hesitant to use volatile instruments to unlock a service or utility. In Addition, attaching economic rights to a utility token, resulting in a hybrid token model, brings the token offering itself into the realm of securities laws. It means that issuers have to comply with all the requirements usually applicable to the security offering.