What is Utility Token?

A utility token is a token designed to grant access to a specific service, feature, or function within a protocol. It is meant to be used and spent not held as an investment or for governance rights.

How does Utility Token work?

Users hold the token to access protocol services.
Spending the token (fees, staking, burning) creates natural demand and reduces circulating supply.
Demand scales with protocol usage more users means more token demand.

Why does Utility Token matter?

Utility tokens create demand tied to real usage rather than speculation. If the protocol is valuable, the token is valuable independent of market sentiment.

Key features of Utility Token

Value derived from use, not speculation
Required to access specific protocol features
Consumption model reduces supply over time
Demand scales directly with protocol adoption

Examples of Utility Token

LINK is used to pay Chainlink oracle operators. GAS is used to pay for transactions on the Neo network.

ETH itself functions as a utility token for paying Ethereum transaction fees.