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Utility Token Meaning

A utility token is a type of digital asset that provides users with access to a product, service, or network functionality within a specific blockchain ecosystem. Unlike security tokens, which represent ownership in an asset or company, utility tokens do not confer equity or dividends but are used to pay for transaction fees, participate in network governance, or unlock premium features.

Examples include the LINK token in the Chainlink oracle network and the BAT token in the Brave browser ecosystem. Many initial coin offerings (ICOs) issued utility tokens to fund development, though regulatory agencies have scrutinised some for functioning as unregistered securities.

When evaluating a utility token, consider the demand for the underlying service, the token’s supply mechanics, and whether the token has real-world utility beyond speculation.

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