Since adopting dual tokens in 2020, Axie Infinity has made dual tokens almost a standard in the GameFi field. Compared to a single token model, is it necessary to use dual tokens? What are the advantages and disadvantages of dual tokens? How are the dual tokens related to each other? What can we learn from past dual token projects? Buidler DAO researchers Jane and Gannicus will take you on a journey to explore these questions.
The dual token model refers to the differentiation of tokens based on their main use. This article mainly discusses the dual token model of FT as a functional token and an equity token. Functional tokens are mainly used to implement specific mechanisms within the system, such as asset upgrades, service payments, and in some scenarios, similar to the currency within the system. The “right” of equity tokens represents the governance rights of the project. The “benefit” represents the scarcity of the token itself, which can appreciate in the market. The separation of equity tokens and functional tokens to a certain extent avoids the infinite dilution of governance rights caused by the increasing issuance due to utility demand, and helps to form a relatively robust governance structure. On the other hand, as equity tokens usually carry more speculative buying pressure, the price of functional tokens can be relatively controllable.
The evolution of the dual token model: 1) Dual token -> multiple tokens: simply increasing the number of tokens may not be a good solution in the attempt to transition from Play-to-Earn to Play-and-Earn. In addition, whether the third token derived from the staking scenario is a better entry point is also worth considering; 2) Dual token -> single token: even in a single token, we have a lot of design freedom to achieve, and a certain degree of closure and a single token system may help stabilize the token price and clarify the value attribution; 3) Reputation system dual token: The difficulty here is that if the reputation token is tradable, its original identification function will be weakened. How to retain its identity while allowing holders to gain economic benefits is a challenge.
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Considerations in dual token design: 1) Token reward design: a good incentive design system should be appropriately matched, which means the measurement is appropriate, and the match is correct without bias. In addition, token rewards are not cost-free, and the cost-effectiveness and long-term possibility of ROI need to be considered; 2) Functional token inflation control: it is necessary to control the source, increase exports, and reduce circulation supply through buyback and burning mechanisms; 3) Equity token release and value attribution mechanism: potential methods include revenue sharing, staking rewards, buyback, burning, etc.; 4) Whether to create value outside of the virtual world?
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