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Why is ILK a utility token?

First of all, let’s start with the basics; what is the difference between utility and security tokens?

Security tokens are similar to shares, in the sense that they derive their value from a tradable asset. If a token is classified as a security token, it is subject to federal securities regulation. We won’t go into detail about what this entails, so if you are interested, you can read a comprehensive article about it {here}.

“Just like paying a toll to use a freeway, the token can be the pay-per-use rail for getting on the blockchain infrastructure or for using the product. This also ensures that users have skin in the game. It can include running smart contracts to perform a specific function, paying for a security deposit, or plain usage fees in the form of transaction fees or other metered metric.” – William Mougayar

In a nutshell, utility tokens are issued by companies to grant access to their services. In the case of Inlock, these tokens (ILK) will be used to take out loans on the platform. Apart from the interest, all platform costs are paid in ILK tokens during a contract formation. Furthermore all participants of the INLOCK ecosystem are incentivised with ILK token rewards – Read our {whitepaper} and {tokenomics} to find out more about our token distribution.

Long story short, we don’t need our tokens to be securities for a couple of reasons.
For one, issuing security tokens would mean – as we mentioned above – having to comply with a wide variety of regulations, without really enjoying any of the advantages that go along with having a securities token ecosystem. On the other hand, a utility token fits our model perfectly. Users need to hold and spend ILK to be able to take out loans on our platform. The amount of ILK tokens one needs to spend is in direct proportion to the collateral value of the loan. We put a lot of thought into how we can incentivize all parties of our platform, and a utility token based operational model seemed to be the best way forward. We have considered a multitude of scenarios to test our model, and we believe we finally arrived. The Inlock token works, so if you’re curios about the INLOCK platform experience, feel free to give it a try at https://mvp-demo.inlock.io/login.php

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