Utility tokens are fungible tokens that unlock functionality in a smart contract or off-chain system (like a Discord community). Utility tokens are difficult to enforce off-chain, so they tend to be most valuable when their functionality is enforced purely on-chain, through smart contracts.

Equity tokens are fungible tokens that represent ownership in an asset or a pool of assets. These tokens are used to incentivize participants to provide a scarce resource to a network. In cryptonetworks, scarce resources include capital, developers, customers, creators, and computing power.

Although there certainly is a risk of over-financializing relationships, many people have talked about the tight bonds developed through these economic graphs.

These limitations reduce economic growth and amplify inequality. As more economic activity moves online, we need internet-native tools for building productive economies. Many people don’t have a bank account but do have a mobile phone with internet access.

Today, top creators are rewarded with inefficient virtual currencies (e.g., likes/follows) and cash from a centralized platform. In the future, creators will build a new form of status through these community-driven NFTs which they own through their private key and can directly redeem for money.

I believe NFTs like these will enable new types of relationship graphs which we can use to build better recommendation systems for job postings, content, dating apps, and much more.

Over time, I believe the internet-native version of a trophy case and a walk-in closet will be collections of NFTs that commemorate important on-chain activity.

At the simplest level, tokens are just code that lives on a global peer-to-peer network called a blockchain. But unlike other forms of money, they’re digitally native, programmable, and secured by one’s crypto wallet and private key. Cryptocurrencies are just one type of token.

Governance tokens represent percentage ownership over voting rights. It’s difficult for most community members to keep up with the latest developments for specific protocols, so most protocols allow token holders to delegate their votes to trusted representatives.