What Is “Utility” in the Context of a Utility Token?

Utility refers to the specific, functional use case of a token within its native ecosystem or protocol. A utility token grants its holder access to a product, service, or feature, such as paying for transaction fees, participating in governance, or staking for network security.

The value of a utility token is theoretically derived from the demand for the underlying service it provides. Without a clear, necessary, and demonstrable utility, a token may be classified as a security by regulators, or simply fail to gain adoption.