In 2017 Utility Tokens gained prominence as a means of fundraising in form of Initial Coin Offerings (ICOs). Blockchain-based Startups sold the tokens to finance their projects. Thereby so-called Utility Tokens were sold as a voucher for future services. By selling those token vouchers upfront companies financed the development of their projects.
However, the different incentives for investors to buy Utility Tokens killed a lot of such projects. One investor group planned to use the tokens for their intended purpose. They preferred low token prices. The second group supported the project with their investment, but hoped for the token price to surge. And a third group, speculators, hoped for price fluctuation to make a quick buck.
Security Tokens, on the other hand, represent real-world assets. So an investor who buys Security Tokens receives a quasi-share in the company issuing the tokens. To speak bluntly, when investing in Security Tokens you get a piece of the airline instead of frequent flyer miles.