Understanding and Reviewing Utility in Different Types of Cryptoassets
Lesson Overview In the cryptocurrency ecosystem, utility refers to the specific function or purpose that a crypto asset serves within its network or platform. Different types of crypto assets—such as utility tokens, governance tokens, and security tokens—each have unique utilities, or use cases, that contribute to their overall value and appeal. This lesson will explore the various types of utility associated with cryptoassets, outline how utility can impact asset valuation, and provide a guide on how to review utility when assessing a cryptocurrency.
Learning Objectives
- Define "utility" in the context of cryptoassets and understand its significance.
- Differentiate between types of cryptoassets based on their intended utility.
- Recognise the impact of utility on the value and functionality of a cryptoasset.
- Learn how to assess and review the utility of a cryptoasset when evaluating potential investments.
1. Understanding Utility in Cryptoassets
In the cryptocurrency world, utility is what gives a token or coin its purpose. Unlike traditional assets, whose value is often determined by market supply and demand alone, cryptoassets often hold intrinsic value due to the functionality or access they provide within their ecosystems. For example, some tokens can be used to pay transaction fees, access specific services, reward loyalty, or participate in network governance.
Utility is normally defined in the White Paper or in other materials describing the QCA.