Tokens can come in different forms and functions.
Some represent :
-
An augur (user’s reputation within a system)
-
A tether ( deposit in fiat currency)
-
A filecoin ( a quantity of saved files)
-
A bitcoin (an internal currency system).
Tokens can fulfill one or several of the following functions:
-
A currency used as a payment system between participants
-
A digital asset (ie land ownership)
-
A means for accounting (API calls- torrent uploads)
-
A share in a company (stake)
-
A reward for contributors
-
Payment for using a product or service
There are two distinct classes of tokens:
-
Utility tokens which act as a future access to a product or service
-
Security tokens that constitute an investment contract, where contributors buy the tokens in anticipation of future dividends, revenue share or price appreciation.
Issuing security tokens under regulatory frameworks is significantly cheaper and faster than conducting an initial public offering with utility tokens and with reduced legal risks.
A security is said to exist when the following four elements exist:
-
An investment of money
-
In a common enterprise
-
With an expectation of profits
-
From the efforts of others
