Regarding Utility tokens
A digital token of cryptocurrency that is issued in order to fund development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency. (A definition from Merriam Webster)
Native tokens are integral to a decentralized blockchain. These tokens are bought, distributed, vested and represent the value of the future product or service and are ultimately traded on exchanges. These circulating tokens provide liquidity and represent the overall interest in the project through the crypto market-cap and the value at which these get traded on an exchange.
The token issuers need to differentiate themselves and find a way to attain network effect. They need to arouse interest in their project and vision so as to increase the token circulation and thus the value. Like a single telephone is of no use (because who would you call until there is a network of telephone users each having a telephone?), similarly, the utility tokens derive their value through circulation, and their utility on a particular platform, thus called a utility token.
The bigger the network grows, the more utility in the token, and because the number of tokens is fixed and usually pre-mined. As the size of the network and transaction volumes within it grows, this will create demand for the tokens.
In order to encourage people to buy, use, keep, trade tokens there can be rewards, bonuses, sales, lotteries and airdrops to adopt the business model and use the services regularly. However, companies who use their tokens for airdrops and giveaways often lose value due to pump-and-dump plays of traders. Users can also be encouraged to use the tokens for payment and enjoy discounts when compared to transactions that do not use platform’s utility tokens. Token holders can also be given more privileges on the platform to be able to vote, or for expedited customer service, preferential rates etc.
Security vs Utility Tokens
Utility tokens are differentiated in terms of security, but often, the boundary remains blurry. Utility tokens have a business use-case. They may grow in price, if the demand for service or product increases. So buying such tokens of a project, that solves real problems of users and is constantly being developed and improved, may give great profit in future. Usually the tokens from a promising project that are bought in an initial sale tend to grow multi-fold and return future profits. One such example is utility token called PROB that is native to Probit.com crypto currency exchange platform.
Security tokens, on the other hand, give their holders ownership rights in the company. A security token’s value is derived from a trade-able asset. They are like the IPO equivalent of the blockchain based ICO and can be utilized for investing, profits and voting rights over the blockchain frameworks.
The 1st utility token with a strong adoption was certainly Ethereum with the revolution operated by the Smart Contracts.
The PROB token
PROB is a payment utility token at ProBit Exchange, by which the trading fee, listing fee, etc. can be paid. Furthermore, PROB provides a number of utilities within the probit.com exchange platform. It is an ERC-20 standard utility token and its main usage is to pay for fees on the ProBit Exchange. ProBit will issue 200,000,000 PROB and the circulation will never increase above that.
ProBit protects PROB holders by NEVER using PROB for marketing or airdrops.
ProBit has implemented a tiered membership system for users, Premium/Standard depending on PROB holding by users. Premium users will qualify for enhanced fee discounts and referral bonus, listing voting rights, and priority access to new features and trading products. The PROB native token comes with following benefits:
- Trading fee discounts
- Voting rights for listing of new tokens
- Increased referral bonus
- Early access to new features (dependent on PROB holding)
After the launch of ProBit Exchange, PROB will enter the Trade Mining period. During this period, for qualified transactions at ProBit, PROB worth 80% of the trading fee based on the market price of the PROB will be mined and issued to the trader as a reward.
Unlike other exchanges that implemented a mining model to their exchange token, ProBit’s utilization of trade mining is meant to encourage active trading on the platform while providing users benefits in being early participants in the platform.
PROB held by investors in the Private Sale and the team are subject to vesting periods. PROB held by users in the Pre-Sale, Main Sale and Trade Mining periods are not subject to lock up or vesting period.