Cryptocurrencies have been around for almost a decade and there are over 1500 different cryptocurrencies. How to buy crypto? “Cryptocurrency can be purchased or sold through a reputed cryptocurrency exchange,” as SoFi advisors say. If you’ve spent any time on the internet, chances are that you’ve heard of some of them, like Bitcoin, Ethereum or Litecoin. However, there is a new type of cryptocurrency that’s gaining popularity called Utility Cryptocurrency.
What is a utility cryptocurrency?
A utility cryptocurrency is a coin created to serve as a medium of exchange. In other words, it’s used as a currency. The most common example of this is Bitcoin: it’s primarily used for payments, and the blockchain supports smart contracts that allow you to do things like buy goods or services with Bitcoin.
Utility cryptocurrencies are often also referred to as “utility tokens.” This term can be confusing because it refers both to physical and digital assets that provide access or rights of some kind—for example, an Uber token gives you access to rides on Uber’s platform.
Utility cryptocurrency companies often have niche interests
You may have noticed that utility cryptocurrencies aren’t as mainstream and popular as other types of crypto, like Bitcoin or Ethereum. That’s because they’re a niche market—they don’t have the reach of those currencies and are often focused on a specific niche. Some examples of specific niches that utility cryptocurrencies are used for include:
- Online services (like file sharing)
- Gaming platforms (think Twitch or Steam)
- Social networking sites
Many utility cryptocurrencies also pay dividends to investors
Dividends are a way to reward investors who have invested in the cryptocurrency. Some utility cryptocurrencies have a dividend payout schedule and pay out dividends regularly.
Dividends are not guaranteed, but they are common. They can also be a form of payment rather than just being used as rewards for people who hold or stake coins. Often, companies will use their own tokens as part of their payment system, usually called staking dividends or proof-of-stake (PoS) dividends.
Some utility blockchain projects are not worth investing in
As with all investments, you should consider your risk tolerance. Many utility cryptocurrencies are legitimate projects that may reward investors with significant returns, but there are also many scams and worthless projects.
If you do invest in a utility cryptocurrency, it’s essential to carefully research the project and its developers before putting money into it. Even if an ICO appears promising at first glance and has a professional website, it might be possible for scammers to take advantage of gullible investors by releasing information that looks legit but is actually false or misleading (for example: “Team member” photos taken from stock photo websites).
Utility cryptocurrencies are a great way to invest in the future of blockchain technology. They offer investors exposure to some of the most promising projects in the space, which can be difficult for individual investors to access on their own. However, many utility cryptocurrencies need to provide more value or investment returns to be worth investing in.