Utility Token Model

Definition ∞ A Utility Token Model describes a framework where a digital token provides access to a specific product, service, or function within a blockchain-based ecosystem. These tokens are designed for consumption within the network, granting holders the ability to use or interact with the underlying platform or application. They are distinct from security tokens, as their value is derived from their practical application rather than representing ownership or a claim on future profits. The model defines how these tokens are created, distributed, and used to power the ecosystem.
Context ∞ The utility token model is a foundational concept for many decentralized applications, providing a mechanism for internal economic activity and resource allocation. A significant discussion involves distinguishing genuine utility tokens from those that might inadvertently be classified as securities due to their economic characteristics. Future regulatory clarity will heavily influence the design and issuance of utility tokens, impacting how projects structure their internal economies and engage with users.