Unlike payment cryptocurrencies, utility tokens are not primarily designed as a means of exchange but serve a unique purpose within a particular ecosystem. These tokens extend beyond simple payments and play a crucial role in decentralized applications (dApps), like for paying transaction fees, accessing premium features, or participating in governance decisions. Ethereum (ETH): Ethereum’s native token, Ether (ETH), is used to pay for transaction (gas) fees and computational services on the Ethereum network.
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Gods Unchained: Gods Unchained is a digital trading card game, where each card is an NFT that players can collect, trade, and use to battle. Decentraland is powered by the MANA token, which can be used to purchase in-game assets like LAND ERC-721 tokens. Decentraland (MANA): Decentraland is a virtual world where users can buy, sell, and trade virtual land and assets. The game emphasizes true ownership of digital assets, allowing players to trade and sell their cards on secondary marketplaces.
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It is also used to interact with smart contracts. Decentralized applications (dApps): Utility tokens like ETH and other ERC-20 tokens are essential for interacting with DeFi protocols, as they are used to pay for transactions and services within these applications. Payment for services: Utility tokens can be used to pay for services such as data storage, computational power, or access to specific features within a blockchain network. Chainlink (LINK): LINK is the native token of the Chainlink network, which provides decentralized oracle services. Specifically, Chainlink tokens are used to pay for data retrieval and other services provided by Chainlink nodes. Basic Attention Token (BAT): BAT serves as a utility token within the Brave browser ecosystem, enabling users to reward content creators and receive incentives for viewing privacy-respecting ads.
Yield farming involves lending or staking assets in DeFi protocols to earn rewards in the form of tokens. Meme coins are a category of cryptocurrency that started as internet jokes or memes but have gained significant popularity. Perhaps the most famous example of a meme coin is Dogecoin, which was created as a parody of Bitcoin, but has since developed a growing and enthusiastic community. These tokens can be traded, reinvested, or used to participate in governance decisions within the DeFi ecosystem. Yield farming tokens have become popular due to the high returns they can offer, but they also come with significant risks, including price volatility, smart contract vulnerabilities, and impermanent loss. They are often driven by community sentiment, social media hype, and celebrity endorsements, making them highly volatile and speculative investments.