Solving the Classic Dilemma of Crypto Assets: Advantages of the Dual Token Model

In the field of blockchain, does the dual-token model have advantages over the single-token model? Although mainstream blockchain networks are unlikely to change their token models in the short term, this question is increasingly becoming a research focus for blockchain developers.

The traditional single Token model undoubtedly has advantages such as high liquidity and simplicity, which is why mainstream public chains like Bitcoin and Ethereum adopt this model. However, only the dual Token model can truly address the long-standing economic contradictions of blockchain - namely, the paradox that actual use of the network can hinder its growth.

The Dilemma of the Single Token Model

Essentially, all blockchains share a common goal: to reliably record transactions, store economic value, and facilitate network development. Although the implementation methods differ, their development direction is consistent.

Currently, the vast majority of blockchain ecosystems rely on a single Token. This Token not only reflects the value of the project but also serves multiple functions such as value storage, medium of exchange, mining rewards, and payment of transaction fees. The problem lies here.

As the foundation of any token-based economy, holders of Crypto Assets hope for the project’s success. They buy Tokens because they recognize the technology, trust the development team, and believe that the project and its native assets will develop well.

However, if they use the Token to pay for gas fees, it will reduce their share in the entire project ecosystem. On the other hand, if they refuse to use the Token, they will overlook the actual application value of the network.

This paradox is easy to understand but difficult to reconcile. Unlike fiat currency, Crypto Assets have the potential to appreciate significantly over time, attracting long-term holders. From the perspective of blockchain, this is beneficial for forming a united community that developers strive to build, which is a positive signal.

Choosing between actively using the protocol ( and holding Tokens by reducing the share ) and the expected profits through paying gas fees creates economic and emotional conflicts.

More importantly, in certain ecosystems, users spending tokens can result in a decrease in their authority and influence within the governance model. This makes users less willing to “spend” their valuable tokens on on-chain protocols.

Advantages of Dual Token Model

Users should not spend tokens merely for the sake of trading value. It’s like buying coffee with Starbucks stock or purchasing the latest iPhone with Apple stock. This pain is more pronounced when gas fees skyrocket due to network congestion.

As early as February, Ethereum’s gas fees hit a new high, breaking the $20 mark for the first time. For loyal supporters of Ethereum, every time they take out $20 worth of ETH for transactions, it’s like tossing 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 addresses this issue. In this model, one token fulfills governance responsibilities, while the other token is solely used for paying gas fees. Holders of the former can be considered 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 fees is completely separate from the main asset, thereby solving the problem of “using the protocol will reduce stakes.”

The dual Token system is still a minority, possibly because the pioneers of blockchain are reluctant to make drastic changes to their Token models. In the past, we have seen several blockchain forks, and the consequences are often unpleasant. Introducing a separate gas Token to modify the fundamental rules of the protocol is a decision that should not be underestimated.

However, the second and third generation blockchains have recognized the benefits of issuing separate tokens for governance/payment and incentive/gas. Not only public chains, but many GameFi projects, stablecoin protocols, and lending/financing platforms have also adopted a dual token system, which means their users no longer need to sacrifice liquidity or compete for scarce on-chain resources.

Some projects are experimenting with different dual Token models, and these attempts are future-oriented.

However, like any experimental technology, the design of the protocol itself may encounter issues. The catastrophic collapse of the Terra blockchain is an example, as this blockchain used the native asset LUNA to help maintain the price of the stablecoin (, particularly the USD-pegged UST token ).

Researchers pointed out that the design of the network created an incentive to short stablecoins long before its collapse, a problem that does not exist in other dual Token systems and should not be repeated.

Dual Token Model Supports Ecological Development

As demonstrated by the several projects mentioned earlier, the economics of a dual Token system is reasonable. The dual Token model typically has the following common characteristics:

First of all, the total supply of the main Token is usually limited, used for governance, SOV(share-of-voice) or dividends. It is usually distributed through public sales or giveaways.

In contrast, auxiliary Token ( or utility Token ) has unlimited or elastic supply. It is used for on-chain payments and gas fees, and is rewarded to participants in the ecosystem or holders of the main Token.

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

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

Following this model, the economic/emotional conflict that forces users to choose between actively using the protocol and long-term investment is resolved. When utility tokens are used for ongoing incentives and system growth, main token holders are simultaneously incentivized to participate in on-chain activities and protect the network.

In cutting-edge technology fields 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 troubling paradox. In terms of blockchain economy, the dual-token model indeed surpasses the single-token model.