Utility Token
A token that grants access to a product or service rather than ownership, used to pay for usage inside a network.
A utility token is meant to be spent, not held as an investment. The classic pitch: the token buys something specific — storage on Filecoin, or trading fees on an exchange. In theory, demand for the service drives demand for the token.
The category exists partly for legal reasons. During the 2017 ICO boom, projects labeled their tokens 'utility' to argue they were not securities and so escaped securities law. Regulators, the SEC especially, often disagreed, looking at how a token was actually sold and marketed rather than the label on it. The line between utility and security stays contested.
Related terms
A token representing a regulated investment — equity, debt, or a share of profits — and subject to securities law.
Governance TokenA token that grants voting power over a protocol's decisions, from fee settings to treasury spending and upgrades.
ICO (Initial Coin Offering)A crowdfunding method where a project sells a new token to the public to raise capital.
TokenA digital asset issued on top of an existing blockchain, usually through a smart contract rather than its own network.