Utility Token vs Security Token - A Classic Comparison Guide For Crypto Token Enthusiasts 
Tags: utilitytokens, securitytokens, iinitialcoinofferingscript, securitytokenofferingscript
Published: 2021-02-25 07:40:53

![Alt Text](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/nx6t0pu2hxtyufjoihew.png)

In the world of blockchain, cryptocurrency and crypto tokens are the new term. These two terms are most familiar among startups, entrepreneurs, and global crypto traders. As we know, blockchain is a complex tech and is also known as distributed ledger technology. Since the invention of the first digital currency(bitcoin), people around the globe started to use this innovative tech in a wide range of use cases.

Blockchain technology is already used in almost all industries in existence. Such as healthcare, finance, banking, insurance, and more. Also, this technology helped to create a vast array of new business models. In recent years, Blockchain tech has brought many useful innovations such as decentralization, new blockchain platforms, and many innovative features in the trading platforms. But one of the essential factors that have contributed to the success of this technology is the creation of crypto tokens.

In today’s crypto space, utility tokens and security tokens are the hot trending concepts that startups are willing to create crypto tokens for their crowdfunding. But what do these terms mean? What are the differences between security tokens vs utility tokens?. In this article, let us discuss the utility tokens vs security tokens in more detail.

Let us begin this comparison article with…

<b>What is a Crypto Token?</b>
Crypto token is a digital asset that has different features than altcoins and bitcoins. These digital tokens are a representation of utility, asset, or a unit of value issued by a company. These cryptographic tokens also represent a tradable asset over an ICO that is completely developed on the secured blockchain technology. Most startups create crypto tokens to raise funds on token sale platforms like ICO, IEO, & STO. 

However, the crypto tokens act as a medium for the creation & execution of decentralized apps, smart contracts, and to facilitate secure transactions. Crypto tokens are generally developed and sold through the standard initial coin offering (ICO) or IEO process that involves crowdfunding mechanisms.

But there is a difference between cryptocurrency and crypto tokens. Some people are thinking that both of them are the same, but the truth is “Not same”. There is a major difference between them. Cryptocurrency is developed with a new blockchain. For example, Ethereum, Bitcoin, Tron, and ripple are separate blockchain. So they are known as cryptocurrency. But crypto tokens are developed on existing open-source blockchain like Ethereum and Tron. 

Currently, two main types of crypto tokens are ruling the entire crypto market. Such as 
Utility Token
Security Token 

So, let’s dive in and explore these tokens in a detailed manner

<b>What is a Utility Token?</b>
A utility token is completely created to use in a specific blockchain ecosystem. Utility token acts as a payment option for buying and selling within the platform. This type of crypto token will be first released by a company or organization to provide their users with a mechanism to pay for a new product or service. . In simple words, All the crypto tokens which are developed and not backed by any asset are known as Utility tokens. For example, many reputed and popular crypto exchanges in the crypto space provided their own crypto token to their users for trading to reduce the charging fees.

In Today’s cryptocurrency market, utility tokens are the most prominent form of crypto tokens. Because in the past year, a tidal wave of crypto startups showed their interest in creating utility tokens. These startups have raised their respective funds through ICO platforms. So they created their own crypto tokens on the Ethereum blockchain and sell them to the public in exchange for ETH.

However, this type of crypto token serves a primary purpose beyond raising funds. The most common type of utility token is the ERC token standard and TRC token standard. Currently, many people are using Ethereum and Tron blockchain to create utility tokens. These two blockchain platforms have a significant standard like ERC20 for Ethereum and TRC20 for Tron. These two token standard types are popular in the crypto marketplace. Thus, many crypto and blockchain startups prefer ERC20 token development and TRC20 token development for creating a utility token.

<b>What is a Security Token?</b>
Security tokens are a digital asset which represents the fractional ownership of any external asset and that can be traded. Creating a security token is not an easy task. because the developer needs to develop security tokens under the SEC Guidelines and the country’s regulations. But the major advantage is, security tokens offer higher liquidity, regulatory compliance, and transparency. 

You may ask, <a href="https://www.icoclone.com/blog/create-a-security-token-with-readymade-sto-script/">how to create a security token?</a>. Security tokens are completely created by backing any securities of the token issuer. The securities can be anything such as real estate, commodities, bonds, shares, precious metals, or whatever. But the essential factor is security tokens are completely pegged by tradable assets. Security tokens act as a share of the company. Also, it is given to the purchaser once the STO ends. By purchasing security tokens, the buyer can get some rights along with sharing in the company stocks.

Security tokens are far different from utility tokens. Because security tokens are limited by some federal laws and rules of stock trading. Like other crypto tokens, the value of security tokens may increase or fall as per the performance of the project. Presently, there are three different types of security tokens. They are

1.Asset token
2.Equity token
3.Debt token
 
You can also create all these types of security tokens by utilizing the premium STO script software. Because it would help you to launch your desired type of security token without any hassle.

Now, let us dive into the main discussion of our article

<b>Utility Token vs Security Token</b>
When it comes to the difference between utility tokens vs security tokens, there are lots of major differences. The following table will help you to understand the exact difference between utility tokens vs security tokens.

![Alt Text](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/5vq74akl74m9unl0ey7a.png)

These are the exact differences between utility tokens vs security tokens. 

<b>Wrapping up</b>
I hope this comparison article helped you understand the significant and basic differences between a security token vs utility token. Experts in the blockchain community predict that asset-backed crypto tokens will be the future of digital currency. Because security tokens have many benefits and it has high security compared to utility tokens. That’s why out of these two, security tokens are considered safer than utility tokens. It is due to the strict regulations and conditions imposed upon security tokens. But as a startup, the choice is yours. You can create either utility token on the top blockchain platform by using premium <a href="https://www.icoclone.com/">ICO script software</a>. Else you can create a security token by using the premium STO script from the leading STO script provider in the blockchain market.