Tokens are separated into two broad categories:
- Utility token is digital assets designed to be used in a specific economy. Users pay their money to get these tokens for future services or product; however, the utility token are not created for the purpose of investment. For instance, people buy Starbucks card and put their money in it because they expect to get its services or products in the near future, not the money. The token has no regulation and no relation with the company’s value. It creates a gap for scammers to represent themselves as company- drive and allure token holders. On the other hand, the purpose of utility tokens is for driving the cryptocurrency protocol and ICOs.
- Security token is created for investment. It is the contract that has been verified in a blockchain and regulated, with an aim to prevent scams. Token holders regularly get some amount of money back when the market profits. The tokens directly relate to the company growth. Generally, the security tokens are the asset that turn into profit.
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