Blockchain and Cryptocurrency Beginner - Crypocurrency Tokens - Security Tokens and Utility Tokens - What They are and the Benefits
Security Token
Security tokens are basically a token on the blockchain which represents an investment contract or a proof of a stake in an asset that is verified on the blockchain. Security tokens are very similar to stocks, bonds and can be issued by various entities, representing equity in a company and profit sharing. When we talk of security tokens, we also talk of profit because individuals who purchase security tokens expect profits from market appreciation or revenue share.
Benefits of Security Tokens
Security tokens offer a couple of benefits which are;
Security tokens are transparent because it is on the blockchain and anyone can view information and data on the blockchain.
Less risk of investment: This is one of the benefits of security tokens because entities that are offering security tokens must provide investors with the legally required information which greatly reduces the risk of fraudulent activities.
Another benefit of security tokens is that there is no downtime because everything runs on the internet and on the blockchain.
Speed of settlement is another benefit of security tokens because everything is automated on the blockchain.
Another benefit of security token is exposure to free-market which helps increase asset valuation.
Another benefit of security token is that there is no physical barrier which means that anyone can invest in these tokens from anywhere in the world.
Polymath
Polymath is a clear example of a platform that focuses on security tokens. Polymath is a decentralized platform protocol that facilitates the creation, issuance and management of security tokens on the blockchain. With polymath, digital securities can be created and issued on the blockchain.
Features of Polymath
- Platform
- ST-20 standard
- Compliance
- POLY token
- Polymesh
- Partnerships
Utility Token
A utility token is another type of token in the cryptocurrency space and they are the most popular type of cryptocurrency tokens. A utility token is basically a token that has utility within an ecosystem and gives holders of the token access to services and also can be spent within an ecosystem. Binance is a well-known ecosystem in the cryptocurrency space. Simply put, utility tokens are meant to have use case within an ecosystem. The Binance exchange needs no introduction as it is one of the biggest cryptocurrency exchanges at the moment. Binance Coin (BNB) is a good example of a utility token which is a utility token of the Binance ecosystem.
Benefits of Utility Tokens
a utility token is a token that powers a blockchain ecosystem
Utility tokens have uses cases and real utilities within an ecosystem
Utility tokens are created around community and users in mind
Utility tokens can be used to lower fees for transactions in an ecosystem
Utility tokens can be used to pay for services in an ecosystem
