Well if you are in the cryptocurrency world for a little while you must have heard the word token quite a number of times
What is a token?
We can elucidate a Token in various ways. A simple way being that token is a structure of cryptocurrency which are sold during an initial coin offering (ico) in exchange for money, bitcoin or ethereum or any form stated by the ico organisers
Types of token according to an article I read on medium platform source
https://medium.com/swlh/types-of-tokens-the-four-mistakes-beginner-crypto-investors-make-a76b53be5406 it's stated clearly there that At the moment, there is no unified classification for tokens. However, there are movements towards resolving this problem from SEC in the USA and FINMA in Switzerland. So the two above institution divide token into utility token and security token
What's is a security token.
According to the dictionary security has to do with protection well according to Wikipedia Howey test, are scales to determine whether an instrument qualifies as an "investment contract" for thepurposes of the Securities Act:
"a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits from the efforts of the promoter or a third party."
Well before a token can be deemed a security it important to pass this test
Well most ico don't want to be a security token because they don't want to be under SEC(security and exchange Commission)
And investors more often don't invest in security token.
When ETH was declared a non security token by sec the value of ETH rose rapidly you can read more here
https://www.[Suspicious link removed]s/www.computerworld.com/article/3269875/blockchain/sec-decision-on-ethereum-cryptocurrency-could-affect-others-funded-by-icos.amp.html
Benefits of security token
In a article on.
https://medium.com/@argongroup/8-important-things-to-know-about-security-tokens-token-regulation-3d548a1a6367 Issuing security tokens under regulatory frameworks such as Regulation D,Regulation S, Regulation A+, and Regulation Crowdfunding is significantly cheaper and faster than conducting an initial public offering structured as utility tokens, and it can significantly reduce legal risk. Also Securities laws have been created and persistently refined for a considerable length of time. Security tokens would acquire an abundance of lawful points of reference that would light up token purchaser rights, insurances and desires. Moreover, they would elucidate obligations and commitments of the guarantor.
What is Utility token
Utility is simply defined as a service provided for the public. Utility token is a digital token of cryptocurrency that is issued in order to fund development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency”
The above is the Merriam-Webster definition of a utility token.
Read more here
https://medium.com/coinmonks/utility-tokens-a-general-understanding-f6a5f9699cc0 Most ethereum erc-20 based token are utility token
One major advantages of is that utility token are most time not included in sec or any other body regulations and this increase the investment if the token is well structured file coin for example raise $257 million dollars in sales by giving user entrance to decentralized cloud storage system so most ico prefers to be under utility token.
How has token influenced the cryptocurrency world
Well capitals are raised by icos by issuing tokens
Tokens can be transferred accros networks and are tradeable on exchanges
