The universe of NFTs (Non-Fungible Tokens) is gaining in importance, attracting more and more users worldwide and arousing the interest of investors and companies interested in using them to expand the range of services offered or to finance their activities in an alternative way.
In a nutshell, an NFT is digital content regulated through the blockchain that represents real-world objects such as works of art, music, games and collections of all kinds. There are different types of NFTs, in this article we focus on Utility Tokens. These 'utility tokens' are useful when a company wants to create a coupon that can be exchanged in the future for access to its services.
Reward Utility Tokens are one of the latest innovations in this field. Let's see how they work.
What are Utility Tokens?
Utility tokens are a category of cryptocurrencies that differ from traditional financial tokens such as Bitcoin and Ethereum. While traditional cryptocurrencies are often used as a medium of exchange or store of value, utility tokens are designed to represent a certain value or utility within a specific platform, and their main purpose is to allow access to services or functionality within that system.
Utility tokens can be used in a variety of contexts. For example, they can be used to obtain discounts on products or services, to access exclusive content, to participate in incentive programmes or to perform transactions within a decentralised platform. The key to understanding utility tokens is that their value is closely linked to the utility they provide within the ecosystem for which they were created.
How are utility tokens used?
The use of utility tokens depends on the specific platform or project for which they were created. Typically, users purchase these tokens through a cryptocurrency exchange or through direct purchase from the issuing platform. Once in possession of utility tokens, users can use them to perform a number of actions, such as:
Access to premium services or features: Many platforms offer premium services or content that can only be unlocked using utility tokens. For example, a video streaming app may require the use of such tokens to access exclusive content.
Incentive programmes: Companies can reward users for certain actions, such as inviting friends or continued use of the platform, with utility tokens. These tokens can then be used to obtain discounts or other benefits.
Voting and governance: In some cases, utility tokens are used to vote on governance decisions within a decentralised platform. They can be used to influence the future development of the project.
Payments within the ecosystem: Utility tokens can be used as a form of payment for goods and services within the ecosystem for which they were created.
Benefits and Limitations of Utility Tokens
Utility tokens offer a number of benefits for both users and businesses:
Benefits:
· Incentive: Utility tokens can incentivise users to actively participate in a platform or perform specific actions.
· Flexibility: They can be used in a variety of ways within a platform, offering flexibility to both users and developers.
· Tokenomics: They can be designed to have a limited supply, which can increase the demand and value of tokens over time.
Limitations:
· Volatility: Like other cryptocurrencies, utility tokens can be subject to significant fluctuations in value.
· Regulation: Regulation of cryptocurrencies varies from country to country, which could create legal uncertainty for users and companies.
· Platform dependency: The value of utility tokens is closely linked to the health and growth of the platform for which they were created. If the platform fails, the value of the tokens could plummet.
Using Utility Tokens for Exclusive Experiences
Companies are increasingly exploiting utility tokens to offer 'rewards', most often in the form of exclusive experiences dedicated to the owners of the security. For example, video game publishers may issue tokens that allow access to additional content, customised skins or special in-game benefits. Social media platforms may reward active users with tokens that allow them to access premium features or participate in special events.
These tokens create a sense of belonging and user loyalty, as they reward activity and continued participation. In addition, they can serve as a marketing tool, encouraging users to engage friends and family on the platform to earn additional tokens.
Rewards Tokens belong to the category defined by the new European MICAR regulation of Utility Tokens and can be used within the business ecosystem to obtain discounts, free products or services, or even to gain access to exclusive experiences.
An example in this regard is the Reward Utility Token system used by TK, one of the projects soon to be available on our platform. By participating in TK events or purchasing merchandising products from the site, it will be possible to generate new tokens that can be spent to gain access to exclusive events or services dedicated specifically to the most loyal customers.