What are Coins/Token?
In general, Coins/Token can be considered as “digital assets” or “digital rights”. Both, Coins and Tokens are transferable and have a value that is determined by supply and demand. Furthermore Coins/Tokens can be listed at cryptocurrency exchanges which eventually make them more fungible. The distinction between a Coin and a Token is rather technical.
- 1. are currencies
- 2. with their own Blockchain
- 1. operate on top of a Blockchain
- 2. can be modified with a multitude of feature that exceed a plain currency
The Utility Token also referred to as App-Token or Service-Token includes a certain future benefit such as access to particular server or services of the issuer. Therefore, the Utility token is not just a classical investment. However, many people contribute to utility token ICOs with the hope that the value of the tokens will increase as demand for the company’s product or service increases. From a legal point of view Utility Token are less complex compared to Equity Token.
Equity Token are designed to participate in price increases of the token. Therefore, this type of Token is also known as “digital share”. Depending on how the Token is designed, the Token holder has voting rights or could participate on the company’s profit. Equity Token can be used to replace a traditional IPO to a certain extent. The legal pitfalls of Equity Token in comparison to Utility Token are immense. That’s why comparable fewer ICOs issues Equity Token.
Effectively, the objective of issuing Coins/Token within the framework of an ICO/ITO is fund projects or companies. Since there is no clear legal definition of Coins/Token the conceptual distinction is often blurred in reality.