Utility Tokens: A General Understanding

A utility token is a non-physical token (think of a Chuck-e-Cheese or Dave & Busters arcade token that you can’t touch, or hold in your hands) that has been created for crowdfunding purposes (think of KickStarter, GoFundMe — those types of sites). This means that the buyer of a utility token has paid the issuer of the token money NOW so that the company can develop a product that the buyer of the token can LATER redeem for that good or service.

Blockchain startups raised $5.4bn (Source: CoinDesk) through Initial Coin Offerings (ICOs). An ICO is the process of when utility tokens are issued and sold in a crowdfunding manner.