Protocol Token Utility

Definition ∞ Protocol token utility refers to the specific functions and uses that a native digital asset serves within its associated blockchain protocol or decentralized application. This utility can include governance rights, staking for network security, payment for transaction fees, or access to exclusive features. The design of a token’s utility is crucial for incentivizing participation, securing the network, and driving demand for the asset. It underpins the economic model and value proposition of a decentralized system.
Context ∞ Protocol token utility is a central element in evaluating the long-term viability and value of digital assets, often discussed in market analysis and project reviews. Clear and sustainable utility is essential for attracting and retaining users and investors. Regulatory bodies are increasingly scrutinizing token utility to differentiate between securities and functional assets. The ongoing development of new use cases continues to shape the competitive landscape of the digital asset sector.