Single Token or Dual Token? A New Approach to Solve the Classic Dilemma of Crypto Assets

The discussion in the blockchain industry regarding Token models has become increasingly heated recently. Although mainstream blockchain networks are unlikely to change their Token models in the short term, this topic has become an area of growing interest for developers.

The traditional single Token model, while having advantages such as high liquidity and simplicity, can only be truly addressed by the dual Token model, which resolves the long-standing economic contradictions in blockchain - namely, the issue that the actual use of the network hinders network growth.

The Root of Contradiction

Essentially, all blockchain projects have similar goals: to reliably record transactions, store economic value, and facilitate network development. Although the methods of implementation vary, the core demands are consistent.

Currently, the vast majority of blockchain ecosystems rely on a single Token. This Token reflects the project value and also serves multiple functions such as value storage, medium of exchange, mining rewards, and transaction fee payments. The problem lies here.

Crypto Assets holders support projects and hope for their success. They purchase Tokens because they recognize the technology, trust the team, and believe that the project and its native assets will have good development.

However, if they use the Token to pay for Gas fees, it will reduce their share in the entire ecosystem. On the contrary, if they refuse to use the Token, they will not be able to truly participate in the network operations.

This dilemma is not difficult to understand but hard to reconcile. Unlike fiat currency, Crypto Assets can appreciate significantly over time, attracting long-term holders. From a blockchain perspective, this is beneficial for forming a united community that developers strive to create, which is a positive sign.

Choosing between actively using the protocol ( and reducing holdings ) by paying Gas while expecting appreciation for long-term holding is an economic and emotional contradiction.

There is another issue worth noting. In certain ecosystems, users spending tokens can lead to a decrease in their rights and influence within the governance model. This further reduces users' willingness to "consume" tokens in on-chain protocols.

However, we have other options.

The Wisdom of Economics

Ideally, users should not consume Tokens merely for transactions. It's like buying coffee with Starbucks stock or purchasing the latest iPhone with Apple stock. This feeling is particularly strong when network congestion causes Gas fees to soar.

In February of this year, Ethereum gas fees hit a new high, breaking through $20 for the first time. For loyal Ethereum users, spending $20 worth of ETH on each transaction feels like tossing away a lottery ticket before the draw. After all, that $20 worth of ETH could be worth $200 in five years.

The dual-token economic model provides a solution to this problem. In this model, one token is responsible for governance, while the other is specifically used for paying Gas fees. This way, holders of the former can be seen as the "owners" of the network, as they have the right to influence the project's direction through voting. At the same time, the token used for paying Gas is completely separated from the main asset, thereby addressing the issue of "using the protocol will reduce equity."

The dual Token system is still rare, possibly because early blockchain projects were reluctant to fundamentally change their Token models. In the past, we have seen some blockchain fork events, and their consequences are often unpleasant. Introducing a separate Gas Token to modify the basic rules of the protocol is a decision that should not be underestimated.

However, the new generation of blockchain projects has recognized the benefits of issuing Tokens separately for governance/payment and incentives/Gas. Not only public chains, but many GameFi projects, stablecoin protocols, and lending platforms have also adopted a dual Token system, allowing their users to no longer have to make trade-offs between liquidity and on-chain resources.

Some projects are trying different dual Token models, and these attempts seem to me to be forward-looking.

Of course, like any experimental technology, the protocol design itself may carry risks. The collapse of certain projects has proven this, where native assets were used to support stablecoins.

Researchers pointed out before its collapse that the network's design created an incentive to short stablecoins, a problem that can be avoided in other dual-token systems.

Dual Token Empowering Ecological Development

As demonstrated by some projects, the economics of a dual Token system is reasonable. The dual Token model usually has the following characteristics:

First, the total supply of the main Token is limited, used for governance, distribution of voting power, or dividends. It is usually distributed through public sales or giveaways.

In contrast, the Auxiliary Token ( or the Utility Token ) has an unlimited or elastic supply. It is used for on-chain payments and gas fees, and is distributed as rewards to ecosystem participants or main token holders.

When the growth rate of economic activity exceeds the inflation supply rate, the price of utility tokens will rise. As the yield of utility tokens increases, the demand and price of the main token will also rise until the yield reaches a new equilibrium.

Finally, the utility Token creates positive feedback for the main Token through economic activities.

Following this model can address the economic/emotional conflict users face between actively using the protocol and long-term investment. When utility tokens are used for ongoing incentives and system growth, main token holders are also encouraged to participate in on-chain activities and protect the network.

In the field of cutting-edge technologies such as blockchain, we need to embrace novel ideas. The dual-token model is no longer a fanciful concept but a viable solution to the aforementioned paradox. In terms of blockchain economics, the dual-token model indeed has advantages over the single-token model.