ICO Token Classes

Posted by: ico-check.com
Article
March 08, 2018
ICO Token Classes

There are various classes of tokens being sold in ICOs, and this article will explain the various classes of tokens and their characteristics.

 

The token classes are:

 

Security Tokens


Can have one or more of the following characteristics:

  • A promise of repayment of initial investment.
  • Promise of profit either in the form of buybacks, dividends or appreciation in price of tokens.
  • May represent ownership in an entity or corporation.
  • If token represents ownership, it may also represent voting rights in an entity or corporation.
  • Some examples are: Scroll Network, tZERO.
 

Utility Tokens


Can have one or more of the following characteristics:

  • Represent access to a system or service or blockchain.
  • Do not promise any repayment of initial investment.
  • Do not promise any profit in the form of dividend or gains
  • Any gains in the market price of a utility token are circumstantial.
  • Can represent voting rights but not ownership in an entity or corporation.
  • Most blockchain tokens fall under utility tokens.
  • Some examples are: ETH, Experty
 

Cryptocurrency Tokens


Can have one or more of the following characteristics:

  • Used chiefly to represent money.
  • Also called cryptocurrency coins.
  • Serves as a replacement for fiat currency.
  • Can serve as a store of value.
  • Any gains in the market price of a cryptocurrency token are circumstantial.
  • Some examples are: HAVVEN, Monero, BTC
 

Novelty Tokens


  • Tokens sold merely for novelty value
  • Mostly issued or sold as a joke or for other purposes
  • No expectation of utility or increase in price
  • Some examples are: Fit Vitalik
 

The different characteristics of tokens are not mutually exclusive with some tokens having characteristics of other token classes.

This list of token classes is not a complete list as it is very possible that more token classes will be invented in the future as crypto and blockchain becomes more commonplace in everyday life and tokens and coins find more uses.

 

The Howey Test

Depending on the country you live in, you may need to register or report the tokens you bought at an ICO especially if your laws deem certain tokens as securities even though they were not sold as such.

We here at ico-check research ask the ICO whether a token is a security or not but sometimes, the ICO team does not give an answer or is unsure of the status of their token.

Ihe US SEC has a test called the Howey Test that can help determine whether or not a token is a security. POA Network hosts a wizard so you can personally check if the ICO tokens you are buying represent a security.

ICO Howey POA

The Howey Test may only apply to US purchasers of tokens as legality varies by country, so when in doubt, always consult a cryptocurrency legal advisor so you will always be on the right side of the law.

Knowing what class of token you are getting enables you to get full use out of the tokens you purchase and lets you know what your rights and legal obligations are. The ico-check team hopes that this article has been helpful in showing what the different classes of tokens are and their uses.