Classification: IPTC: 04019000 • IAB-QAG: IAB13-3, IAB13
Please enjoy this #crypto content, Utility tokens vs. equity tokens: Key differences explained
Originally reported on cointelegraph.com by Cointelegraph By Murtuza Merchant, below.
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Investors familiar with the concept of equity investing will find equity tokens to be an extension of the same thought process as initial public offerings while those with a riskier appetite can venture into plonking their capital on the utility tokens in which they believe.
One glaring difference between utility and equity tokens is the fact that the former is not regulated as they provide access to a service rather than a specific investment in an asset or company as do equity tokens.
However, for those asking the question of whether utility tokens can be traded, the answer is that they are similar to equity tokens in this aspect and are available for trading on various exchanges.
To answer whether utility tokens are good investments though, any money put into a utility token needs to be weighed against the prospects of the service being offered by the issuing company and the potential rise in its demand to generate returns for token holders.
On the other hand, equity tokens are regulated and issued by existing firms that are already in business and provide token holders with voting rights that allow them to participate in the working of the company.
For novice crypto investors, it seems more prudent to invest in equity tokens as they are an extension of equity shares on the traditional stock market and are an easier concept around which to wrap oneself.
However, if you believe in the prospects of a blockchain project like XRP and want to gain an early mover advantage, it may be more beneficial to put your money on a utility token ICO and ride the demand wave to generate handsome returns in the process.
Do remember that utility tokens are not treated as a security and therefore, will have a higher risk involved when investing. Either way, it is important to read all the terms and conditions before investing money and understand the applicable fees that are levied on redemption or while trading these tokens on the various exchanges available in the crypto market.
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