Payment tokens, utility tokens, and security tokens are distinct categories of crypto tokens, each serving different purposes within the blockchain ecosystem. Payment tokens, like Bitcoin or Litecoin, are primarily designed to function as digital currencies, enabling peer-to-peer transactions and serving as a medium of exchange. Their main goal is to facilitate fast, secure, and decentralized payments without intermediaries.

Utility tokens, on the other hand, provide access to specific services or functionalities within a blockchain platform. For example, Ethereum’s Ether (ETH) is used to pay for transaction fees and execute smart contracts. Utility tokens are not intended as investments but rather as tools to interact with a particular ecosystem.

Security tokens represent ownership in an asset, such as shares in a company or real estate, and are subject to regulatory oversight. They derive their value from external, tradable assets and often provide dividends or profit-sharing to holders. Unlike payment tokens, security tokens are designed as investment instruments.

The key difference lies in their purpose: payment tokens focus on transactions, utility tokens on platform access, and security tokens on ownership and investment. This distinction also affects their regulatory treatment, with security tokens facing stricter compliance requirements compared to payment and utility tokens.