Utility coins, or tokens, are a type of crypto asset designed with a specific use case in mind. In contrast to regular cryptocurrencies, their primary purpose is not to store value or serve as an exchange medium. Sometimes, however, they do both.
Furthermore, utility tokens are usually distributed during initial coin offering (ICO) events. One of the reasons for that is that they are often used for governance privileges. Governance tokens allow initial investors to vote on the direction of a blockchain project.
Other notable use cases for these tokens include gas fee coverage, access to premium features, and the ability to earn rewards. If you want to learn more about them, read our list of six popular utility tokens.
6 Popular Utility Coins
Chainlink is a decentralized oracle network designed to connect smart contracts to off-chain data and real-world events. It is powered by LINK, a utility token that serves as a native token of the Chainlink ecosystem.
The LINK token has several use cases that make it a utility token. It is used as a payment method for node operators who provide data to the Chainlink network. These node operators are incentivized to provide accurate data to the network in exchange for LINK tokens.
Furthermore, the LINK token is used as collateral to secure smart contracts on the Chainlink network. Smart contract creators must stake a certain amount of LINK tokens to ensure the accuracy of the data being provided by the Oracle network. If the data is inaccurate, the staked LINK tokens are forfeited.
But that is not all, as LINK can also be used for governance purposes within the Chainlink ecosystem. Holders of LINK tokens can vote on proposals related to the development and improvement of the network.
Polygon, formerly known as Matic Network, is a Layer 2 scaling solution built on top of Ethereum. It aims to address the scalability issues of Ethereum by providing faster and cheaper transactions.
Polygon’s token, MATIC, is a utility token that serves various purposes within the Polygon ecosystem.
MATIC can be used to pay for gas fees on the Polygon network. Investors use MATIC tokens to pay for transaction fees, and the more MATIC tokens they hold, the more transactions they can cover.
More importantly, MATIC is also a governance token, giving holders the right to vote on proposals and changes to the Polygon network. This means that users who hold MATIC tokens have a say in the direction and development of the network.
Finally, MATIC can be used as a staking token, allowing users to participate in the network’s proof-of-stake consensus mechanism. By staking their MATIC tokens, users can earn rewards for validating transactions and securing the network.
Binance Coin (BNB)
Binance Coin serves as the primary digital currency of the Binance exchange, one of the largest cryptocurrency exchanges. The Binance exchange was created by Changpeng Zhao in 2017.
BNB is a utility token because it serves a number of functions within the Binance ecosystem.
Trading Fee Discounts: Binance users can use BNB to pay for the platform’s trading fees. When they do, they receive a discount on the fees they pay. The discount decreases over time, with the biggest discounts available during the first few years after Binance launched.
Launchpad Token Sales: Binance has a platform called Launchpad that allows users to participate in new token sales. Users can use BNB to buy these new tokens and get a discount for doing so.
Payment for Services: Binance has expanded beyond its exchange services and now offers a range of other services, such as a cryptocurrency wallet and a payment card. Users can use BNB to pay for these services.
Staking Rewards: Binance also allows users to stake BNB to earn rewards. By holding their BNB tokens in a staking account, users can earn a percentage of the fees generated on the Binance exchange.
Uniswap is a decentralized exchange protocol that allows users to trade cryptocurrencies without intermediaries. It is built on Ethereum and operates using smart contracts.
Uniswap’s token, UNI, is a utility token that serves several purposes within the Uniswap ecosystem.
Firstly, UNI tokens are used for governance within the Uniswap protocol. Their holders can vote on changes and proposals to the protocol, such as changes to the fee structure or the addition of new assets. This gives individuals who hold UNI tokens a say in the direction of the protocol.
Secondly, UNI tokens are used to incentivize liquidity providers. When users add liquidity to Uniswap pools, they earn a portion of the trading fees generated by that pool. In addition to these fees, liquidity providers also receive UNI tokens as a reward for providing liquidity. This incentivizes users to provide liquidity to Uniswap pools, which in turn helps to ensure that the platform remains liquid and efficient.
Finally, UNI tokens are used for community building and education. The Uniswap team has allocated a portion of the total supply of UNI tokens toward community initiatives, such as grants and educational programs.
Decentraland is a virtual reality platform built on Ethereum. It supports the creation and monetization of content in a virtual world.
The platform is powered by two tokens.
MANA is the primary utility token of Decentraland. It is used for a variety of purposes within the platform, including the purchase of virtual land, payment for goods and services, and access to premium content. In essence, MANA is the currency used within the Decentraland ecosystem.
The LAND token, on the other hand, represents a piece of virtual land in Decentraland. Each LAND token corresponds to a specific location within the virtual world and can be used to create and monetize content on that piece of land.
Both MANA and LAND are considered utility tokens because they provide access to specific functions or services within the Decentraland platform. MANA is used to facilitate transactions and access premium content, while LAND is used to create and monetize content in specific locations within the virtual world.
Basic Attention Token (BAT)
Basic Attention Token is a cryptocurrency that is designed to revolutionize the way online advertising works. Its token, BAT, is built on the Ethereum blockchain and is used as a utility token within the Brave browser ecosystem. The Brave browser is a privacy-focused web browser that blocks ads and trackers by default and enables users to earn BAT tokens.
One of the key benefits of BAT is its ability to improve the online advertising experience for both users and advertisers. It incentivizes users to engage with ads in a way that benefits both themselves and advertisers.
BAT is considered a utility token because it has a specific function within the Brave browser ecosystem. Users can use BAT tokens to tip content creators for their work or to pay for premium content and services within the browser. Additionally, advertisers can purchase ad space with BAT tokens, and users can earn BAT tokens by viewing those ads.
Utility coins are a type of crypto asset intended for particular use cases. They offer several functions and are used for governance privileges, gas fee coverage, access to premium features, and the ability to earn rewards.
Some of the most popular utility coins include LINK, MATIC, BNB, UNI, and MANA. Each is used differently in its respective ecosystem. For example, they can be used for making payments for goods and services, staking, and community building.
Ultimately, these coins offer an exciting opportunity for investors to be part of innovative projects and make meaningful contributions to the blockchain and cryptocurrency industry.