In recent years, the financial world has shown constant development and has led to the emergence of many innovations such as cryptocurrency. This digital currency has set a new standard with its promising concept and has created new models for businesses since the concept of tokenisation was introduced to the world. However, a new challenge has also emerged for crypto enthusiasts: which is the better investment, utility or equity tokens? Read on to know the difference between these two and which is the better investment.
Tokenisation refers to the creation of tokens as a medium of data by providing a non-meaningful equivalent to a meaningful piece of data. You probably think that tokenisation is a new thing that comes with cryptocurrency, but the truth is it has already existed even before the development of cryptocurrency. Over the years, tokens were already used as a representation of money. For instance, casinos replace real money with chips.
In simpler terms, this process replaces confidential data with unique identification symbols that retain all the important information without sacrificing its security. Security is indeed very important when it comes to cryptocurrency, which is why in choosing a crypto platform, some traders and investors visit the official website of Immediate Edge: https://immediate-edge.io. This platform utilises advanced tools and high-security measures to ensure you’re trading safely.
Benefits of tokenisation
In the world of cryptocurrency, there are two types of tokens: equity tokens and utility tokens. But before we dive in and discuss these two, let’s take a look first at the benefits offered by tokenisation and why it is essential in your cryptocurrency career.
Tokenisation uses cryptography to make users’ data safe and secured, but how? Cryptography allows storing personal and confidential data and restricts anyone from downloading it online. The only way to access these data is through using a private key, which only users possess.
What most crypto users love about blockchain technology is its transparency. This peer-to-peer network allows traders to view the details of their transactions. Since it has no central server, it gives traders peace of mind knowing that online attacks such as breaches, hacking, fraud, and theft are very small.
The majority of cryptocurrencies, such as Ethereum, use smart contracts which permit automated transactions. This type of transaction does not require the presence of any third-party or intermediaries such as banks or the government.
This technology stores information and the data behaviour is stable, which means it cannot be changed, removed, counterfeited, or corrected by anyone. This boosts users’ confidence to perform transactions knowing that all their data are stored privately.
Understanding Utility Tokens
Utility Token refers to the coin app or user token which provides access to digital coupons that are redeemable in the future for a discounted price or a special discount for certain products and services. Since the government or the law does not regulate these tokens, they do not function as investments.
This type includes gift certificates, public transport tickets, or cards. In the world of cryptocurrency, Bitcoin is considered a utility token since it is not affiliated with the government and can be owned and stored to be utilised for future transactions.
Understanding Equity Tokens
Equity tokens or security tokens refer to blockchain technology-based tokens that utilise cryptography while offering advanced security features. This type of token serves as a representation of a share from a company that issues this token. Aside from the security features, investors who buy or invest in this type of token also benefit from it as a protection from fraud because the government regulates this type of token.
Which is the better choice: Equity vs Utility?
Which is the better choice between these two tokens depends on your target goals as a trader or investor. To recap, one impactful difference between equity and utility is that the latter is not regulated by third party agents such as banks or the government. Due to this, they provide access to a service rather than a specific investment in an asset or company compared to equity tokens.
For advantage investors who prefer to have full control over their tokens, utility tokens may be tempting as they can be stored for a long time. Meanwhile, equity tokens appear to be a better option for new investors since they are an extension of equity shares on the traditional stock market, which are simpler to understand.
Opening the door to the world of cryptocurrency can feel like being transported to a parallel universe, where nothing makes sense and people sound like they’re speaking another language. No matter how long you have been part of this world, you may have heard of tokens once or twice, and it’s extremely important to understand the difference between a utility token and an equity token. Although both tokens exist within the generic group of cryptocurrencies, they are not remotely the same. So, make sure to check out the discussion above and determine which token suits your career best.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.