Utility tokens, as the name suggests, are tokens that have specific utility benefits. A loyalty coin, which is essentially a loyalty point that can be traded on an exchange, is the most common example. Another example is a payment token that can be used in place of dollars to get a discount on your services. Utility tokens
differ from security tokens in a way that they can be easily exchanged, while the latest have legal limits on selling.
Utility tokens are the most common among blockchain companies. The majority of cryptocurrency exchanges, for example, encourage consumers to conduct payments in their own utility tokens.
What is the point of making your reward points tradable or issuing a special payment form, you might wonder. The advantages vary depending on how the token scheme is implemented:
1. If the key revenue-generating measure is how much time users invest in your app, for example, you can award them for certain activities and reaching some in-app benchmarks. If these tokens can be traded directly on the secondary market, it gives users a financial motivation to invest time in your app.
2. Your token price receives more recognition and interaction as a result of your efforts. Some people will speculate on it, and others will keep a token hoping for it to appreciate in value one day. Both will help your company to always stay in the spotlight by sharing its news and updates; people will tweet about your business, talk about it with their friends, and pay more attention to your social network because, like with a security token, they now have a personal interest in it.