Security Token Offering 101 — Token Generations. What Are The Different Token Categories?

Generation 1: Crypto Currency Tokens

The first generation is the crypto currency token, with Bitcoin being the first and biggest example. It is a token that is used as a general and digital means of exchange, without representing a physical or monetary underlying value. If this is the first time you hear about Bitcoin, we advise you to google it.

Generation 2: Utility Tokens

The second generation is the utility token, which first came into circulation thanks to the introduction of the Ethereum network, with their native token Ether being the first utility token. The utility token is also a digital means of exchange, yet only to be used within a specific network.

Generation 1b: Stablecoins

As crypto currency tokens and utility tokens are being heavily traded on token exchanges like Kraken and Binance, the need for an intermediary means of exchange, insensitive to crypto price fluctuations, became highly desirable. Enter the stablecoin generation. A stablecoin is a crypto currency token which is backed (pegged) with fiat currency. A good example is Tether, which is designed for each Tether token to always represent exactly 1 USD.

Generation 3: Security Tokens

The third generation is the security token. A security token is an actual security — a tradable financial asset, like a company share you buy on the NYSE or Euronext (e.g. Apple) — yet in the most digital format ever. Unlike crypto currency tokens and utility tokens, a security token actually represents an underlying value, which can be any kind of asset, equity, or debt.

The Wood for The Trees

If you carefully consider what you just read, you will notice that each new generation of tokens is an improved version of prior generations, with new possibilities.



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Security Token Offering (STO) advisory. Located in Benelux.