Tokens With Purpose: Utility is the Smart Investor’s Guiding Light

Exploring Cryptocurrency Trends, Risks, and Utility Tokens in 2024

As of 2024, there are over 2.52 million cryptocurrencies, a more than fivefold increase from 2021. They broke into the millions range in the fall of 2022, reaching 1.15 million by the end of the year, up 159.2% from the previous year. By April 2024, more than 500,000 crypto tokens had been created, equivalent to 5,300 a day on average.

Many of them are destined to fade into oblivion. Others, like the highly anticipated WELF token, hold promise in terms of utility.

Prospective token investors should stay current on the development of digital asset projects. They are advised to read the white paper and ask questions on any unclear aspect, ideally to the founders themselves. Legitimate project founders are normally available to anyone who reaches out on platforms like GitHub, Discord, Medium, Telegram, etc.

The token solves a problem

An obvious example is Bitcoin, whose peer-to-peer transfers solved problems with the traditional financial system. Smart investors will discover the token’s unique value proposition before buying into the hype. It’s reasonable to expect blockchain projects that solve a pressing problem to provoke higher demand and be more sustainable, creating potential for the token’s long-term value. For example, the WELF token addresses a gap between TradFi and DeFi, building a bridge between digital and conventional banking. The platform’s creators boast expertise in wealth management that they have combined with cutting-edge digital platforms, culminating in secure and flexible solutions tailored to high-net-worth individuals’ unique needs.

The new WELF token enables governance participation, platform transactions, and premium service access. Holders can pay platform fees, including for product issuance and transactions, help make crucial governance decisions, and use a staking-based subscription model to unlock exclusive financial and lifestyle services. WELF recently revealed its official token listing on MEXC, and trading will start at 12:00 UTC on December 19. This is a significant step following the platform’s successful token sale across IDOs.

While a cryptocurrency doesn’t have to have utility to be a lucrative investment (case in point: Pepe), it’s a good start. Utility tokens give users access to features such as premium content, trading, lockups, paying transaction and gas fees, executing data queries, etc. The next section will give examples of proven cryptocurrencies with utility.

CRO, LINK, TRX, and POL

The Cronos (CRO) token is native to the high-speed Cronos blockchain. Cronos Labs developed and owns the ERC-20 token, which can be used for payments, trading, lockups, and other purposes. It integrates with the crypto.com app and DeFi wallet, as well as other ecosystem products and services.

Chainlink (LINK) is a decentralized Web3 oracle network that bridges the gap between real-world data and blockchain networks. It uses oracles to allow smart contracts to extract data autonomously from verifiable and trusted sources. The native token, ranking 12th by market cap at the time of writing, executes data queries, making it one of the best utility coins for data-driven applications.

TRX powers TRON, a solid blockchain-based ecosystem explicitly designed for decentralized applications (dApps). The token helps create and execute smart contracts, which streamline transactions. TRX facilitates seamless interactions within TRON, paving the way for more effective and intuitive dApps. It is currently tenth by market cap.

The Polygon blockchain improves upon Ethereum’s scalability and helps reduce gas fees. POL, Polygon’s native utility token, is used to pay gas fees and lets holders take part in network governance. 

Main and notable types of token utility

Two common token utilities are means of payment and staking. On most blockchains, holders can pay gas fees, transaction fees, or both. Tokens of dApps running on top of an existing blockchain give holders similar utility to pay for internal services and products.

Staking is a way to generate passive income. One doesn’t need paired tokens like they would for yield farming, which implies a lower investment risk. The holder stakes one token and can start earning more of it or other tokens. Platforms like Pancake Swap allow users to stake their native tokens and earn other project tokens.  

There is a specific category called security tokens, or digital assets deriving their value from a tradable external asset. They are subject to federal laws governing securities and can involve an entitlement to interest payments or dividends. Economically, they function similarly to bonds, derivatives, and equities. Security Token Offerings take place to enhance investors’ trust in the respective project.

Risks and considerations

The cryptocurrency market is notoriously volatile, and one can risk losing hard-earned funds, making the consideration of legitimacy all the more essential. Factors like regulatory changes, market sentiment, technological developments, and overall market tendencies often induce token price movements. The laws and regulations governing digital currencies vary by jurisdiction and change frequently. The resulting market situation conveys to investors that they shouldn’t transfer funds they can’t afford to lose into projects, but if they choose tokens with actual use cases, the risk of loss is markedly lower.