Why Do Crypto Projects Need a Token?
Understanding Utility vs Speculation
A common beginner question is: Why does a crypto project need a token at all?
In traditional markets, a stock represents ownership in a company. But in crypto, a token does not automatically mean ownership.
So what exactly is the token’s purpose? Why do some projects need tokens while others clearly do not? And how do you identify real utility versus speculation?
1. Bitcoin: The First Asset That Needed a Token
Bitcoin was the first decentralized digital money that could operate without a central authority. To function, it needed a native asset for two reasons:
it had to reward miners for securing the network, and it needed a unit of value that could be transferred peer to peer.
The Bitcoin token (BTC) is not optional. It is the reward, the currency, and the security mechanism. Without BTC, there is no reason for miners to contribute energy or resources, and the network simply would not exist.
2. Ethereum: Tokens as Fuel and Incentives
Ethereum expanded the idea of blockchain by creating a programmable smart contract platform. For that to work, the network needed a token that users would spend to run code, pay fees, and reward validators.
ETH is used for gas fees, powering smart contracts, and securing the chain. In this case, the token has multiple layers of real utility because it enables the network to function.
Just as oil runs a machine, ETH runs decentralized applications.
3. Tokens as Rewards for Work
Some projects use tokens to reward users for providing real-world resources like storage, wireless coverage, GPU compute, or map data. In these networks, the token is an incentive mechanism.
Helium (HNT) rewards people for creating decentralized wireless networks.
Filecoin (FIL) rewards users for providing storage.
Render (RNDR) rewards distributed GPU providers.
Here, the token aligns human behavior with network growth. Without the token, there would be no reason for users to contribute physical resources.
4. Governance Tokens: Influence not Ownership
Many DeFi and Web3 protocols introduce tokens to let the community vote on important decisions. Governance tokens like UNI (Uniswap), AAVE (Aave), COMP (Compound) or LDO (Lido) grant voting rights, not company ownership.
They allow users to influence protocol parameters, treasury spending, rewards, and long-term direction. In these cases, the token is meant to decentralize control rather than generate profit.
5. Memecoins: The Speculation Token
Not every project needs a token, yet many launch one anyway. Some do it for fundraising, hype, marketing, or because investors expect “every project to have a token.”
Examples include simple apps built on Ethereum or Solana that could function with ETH or SOL fees, NFT platforms that do not need a separate token, and meme coins launched purely for entertainment. Or one can argue for a very unique utility: “Fueling the get rich quick dream” which often turns out to be disastrous.
These tokens often lack true demand and rely on hype cycles, making them fragile when attention disappears.
Strong Projects With No Token at All
A great example of a high-quality crypto project with no token is MetaMask. It is the most used Web3 wallet globally, powering millions of users and billions in transaction volume without issuing a token.
Another strong example is Ethereum Name Service (ENS), which built years of infrastructure before even considering governance. Even today, ENS’s token is only for voting, not for the core function of the protocol.
Many developer tools, wallets, explorers, data platforms, and rollup infrastructure projects choose not to launch tokens because they simply do not need one for the product to work.
This proves a simple truth: good technology comes first. A token should solve a problem, not create one.
How to Identify Real Token Utility
Before evaluating a token, ask a few simple questions:
Does the network require a token to function?
Bitcoin and Ethereum are strong examples where the token is essential.
Does the token reward contributors for providing real value?
DePIN networks like Helium or Render need tokens to incentivize resource providers.
Does the token give meaningful governance power?
If token holders can control the treasury, adjust parameters, or upgrade the protocol, governance utility is real.
Is there ongoing demand for the token?
Users may need the token to pay gas fees, stake, access services, or purchase storage or compute.
Could the project work exactly the same without the token?
If the answer is yes, the token’s purpose is likely speculation, not utility.
The Key Insight
Not every crypto project should have a token. Some tokens are essential, like BTC and ETH. Some are practical incentive tools, like RNDR or FIL. Some decentralize governance, like UNI or AAVE. But many exist purely for hype, speculation, or fundraising.
The task of a smart user or investor is to understand whether the token brings real value that cannot be replaced. If a token is required for the network to operate, reward contributors, or coordinate a decentralized system, that is true utility. If it only exists to attract attention, it is speculation with extra steps.
Understanding this difference helps beginners avoid weak projects and focus on the fundamentals that actually matter.
Not Financial Advice