Utility Tokens vs. Equity Tokens: Key Differences Explained

Investors familiar with the concept of stock investing will find that stock tokens are an extension of the same thought process as IPOs, while those with a riskier appetite may venture to allocate their capital to the utility tokens they hold believe.

A glaring difference between utility and equity tokens is the fact that the former are unregulated as they offer access to a service rather than a specific investment in an asset or company, as is the case with equity tokens.

However, if you are wondering whether utility tokens can be traded, it should be said that they are similar to equity tokens in this aspect and can be traded on different exchanges.

To answer whether utility tokens are good investments, any money invested in a utility token must be weighed against the prospects of the service offered by the issuing company and the potential increase in its demand in order to generate returns for token holders.

On the other hand, equity tokens are regulated and issued by existing companies that are already in business, granting voting rights to token holders, allowing them to participate in the company’s work.

For novice crypto investors, investing in stock tokens seems to make more sense as they are an extension of stocks in the traditional stock market and a simpler concept to wrap around.

However, if you believe in the prospects of a blockchain project like XRP and want to gain an early mover advantage, it may be more beneficial to invest your money in a utility token ICO and ride the demand wave for handsome returns in the process to achieve.

Keep in mind that utility tokens are not treated as collateral and therefore carry a higher level of risk when investing. In any case, it is important to read all terms and conditions before investing any money and understand the applicable fees that are charged when redeeming or trading these tokens on the various exchanges available in the crypto market.

 

Source: cointelegraph

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