Platforms Allow for Innovative Utility Tokens

utility tokens

Why platforms can issue tokens

Platforms facilitate the creation of tokens as a way of expanding their own product or service offerings. This is a platform’s strength, that outside developers can use it to build upon, creating products for others to use and issuing tokens as a means for creating utility or funding projects.

In the broadest sense, a token “is a digital asset that can be transferred (not simply copied) between two parties over the internet without requiring the consent of any other party.”

There are three types of tokens: coins or cryptocurrencies, utility tokens, and tokenized securities or equity tokens. People are most familiar with the first type, but here we will discuss the second, utility tokens – what they are and how they function within platforms, networks, or other online ecosystems.

What are utility tokens?

Utility tokens essentially function as tickets, providing users with future access to a product or service. They’re also referred to as app coins or user tokens. Startups issue utility tokens via ICOs in order to raise money to develop blockchain projects of shared infrastructure. Users purchase future access to that project’s product or service when it becomes available later. By purchasing these tokens, users will sometimes get a price discount for a specific product. However, utility tokens, unlike equity tokens, do not give users an ownership stake in an asset or platform. Instead, these tokens simply make purchasing blockchain-based services faster and easier (and possibly offer additional privacy to the user).

Balaji S. Srinivasan, CEO of, compares utility tokens to paid API keys:

The best existing analogy for tokens may be the concept of a paid API key. For example, when you buy an API key from Amazon Web Services for dollars, you can redeem that API key for time on Amazon’s cloud. The purchase of a token like ether is similar, in that you can redeem ETH for compute time on the decentralized Ethereum compute network. This redemption value gives tokens inherent utility.

Examples of utility tokens include the Vevue token for Vevue, a P2P incentivized video network based on the Qtum blockchain, and the MED token which is used to access MediBloc, a decentralized healthcare information ecosystem built on blockchain technology for patients, healthcare providers, and researchers. Several different industries are not employing platform tokens as a means to access private data or facilitate service payments.

Basic Attention Token (BAT)

The BAT is an Ethereum-based utility token that internet users should become familiar with. The BAT functions within the Brave browser and allows users to reward the websites they enjoy directly – rather than indirectly via advertising impressions. As presently constituted, advertising tends to rewards content providers in an uneven and not altogether equitable manner. And yet, its what websites must rely upon for their continued existence.

Brandon Eich and Brian Bondy developed Brave with the goal of fixing the internet’s privacy intrusion and data gathering model. Brave blocks website trackers and removes intrusive advertisements while still allowing for an ad-supported internet. In order to accomplish this, they use the BAT token as a medium of exchange between publishers, advertisers, and users. Thus, advertisers purchase the tokens, publishers receive them for hosting their ads, and browser users receive them for viewing the ads.

However, BAT tokens are not refundable, and they do not confer ownership in the Brave browser. They simply measure and verify user-attention towards online content, without exposing users to the ubiquitous advertising spam we all know and deplore. Better yet, users can forego having their personal data gathered and sold via cookies or any other online tool. And best of all, Brave provides payments to publishers based on their website usage (as the BAT token reveals). While the BAT is not valuable in an of itself, it capacity to measure what internet viewers value without counting clicks or manipulating viewers is long overdue.

The Kermacline

As you can see, blockchain platforms have the capacity to provide interesting utility tokens. What’s more, the value these utility tokens hold may well extend beyond their use-case. That is, they may be used in the same way a cryptocurrency is used. How far this extends to – until fiat is employed – is ultimately left up to the user (even if such tokens are not exchange-ready).

Raphael Rottgen’s article In Defense of Utility Tokens examines this boundary and calls it the Kermacline. He asserts that it’s the crypto community’s responsibility to push the Kermacline outward – that is, into the fiat-inhabited economy. Rottgen reminds us that the locked-in consumption that utility tokens offer is hardly different from that offered by a Starbuck’s Gift Card. Both provide the same type of psychological reward. In other words, utility tokens have value beyond any strict financial compensation criteria.

XFUEL’s Kermacline

Why speak about the Kermacline? Because XTRABYTE’s internal development token XFUEL may serve to push its own Kermacline boundary outward. While the XFUEL token can be exchanged for XTRABYTES, its highly conceivable that this token will be valued for other purposes as well. Consider the many possibilities such a token might serve on a decentralized exchange, one in which XTRABYTES’ static node owners can bid on project coins (yes, I’m thinking of XTRABYTES’ X-CHANGE). Aside from common liquidity challenges, the only apparent use-case constraints that XFUEL faces may reside in a developer’s imagination (or a financial regulator’s guidebook)

The use-cases that platform-based utility tokens might serve has barely been scratched. XTRABYTES’ code-agnostic approach greatly expands these possibilities, as developers are freed from learning an entirely new programming language simply to achieve their vision (the Solidity language requirement for Ethereum being the most prominent constraint). As platforms become ubiquitous, investors may wonder why they remained so enthralled with single-use cryptocurrencies in the first place.

Would you like to know more?

We don’t just publish articles, XTRABYTES™ is a whole new blockchain platform that allows DApps to be programmed in any language, utilizing a new consensus algorithm called Proof of Signature. In doing so, XTRABYTES™ presents a next – generation blockchain solution capable of providing a diverse set of capabilities to the general public.

You can learn more on our website where you can also help to spread the word through our bounty program and get rewarded in XFUEL™, or join our community and hop into the discussion right now!

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