Introduction
When tasked with designing token economic models for project teams, the choice between single-token and dual-token systems has become a recurring dilemma.
Previously, my default recommendation was the dual-token approach—but upon reflection, I realized this wasn’t always optimal. Both models have merit, provided they’re backed by compelling reasoning. This article explores their nuances, focusing primarily on gaming (though the principles apply to broader crypto projects). Games offer a sandbox for token utility, with richer economic mechanisms than most projects.
Let’s dive in.
The Role of Tokens
Tokens in games primarily enable economic mechanisms that only blockchain can facilitate.
Beyond speculation (which often harms gameplay, as discussed in "Crypto Gaming is Broken"), tokens revolutionize in-game economies by closing the loop on microtransactions. Unlike one-way value flows (e.g., unlocking perks), tokens create bidirectional exchanges:
- Player-to-Game (P2G): Purchases like battle passes, cosmetics, or progression boosts.
- Player-to-Player (P2P): Trading resources (NFTs, currency, etc.) via markets or auction houses.
Tokens bridge these transactions to real-world liquidity, letting players convert in-game assets to cash—a paradigm shift from traditional gaming.
Secondary use cases (fundraising, governance, or speculative ownership) exist but shouldn’t overshadow the core value: enhancing gameplay economics. The key question is whether token models can align game quality with community incentives—or if they inherently conflict.
Dual-Token Model
Pioneered by Axie Infinity, this uses two tokens:
- Governance Token (AXS): Fixed supply, accruing value over time.
- Utility Token (SLP): Infinite supply, dynamically minted/burned for game balance.
Advantages
- Decouples speculation from gameplay: Investors target AXS (like a "stock"), while SLP fuels the economy.
- Easier fundraising: Fixed-supply tokens appeal to investors; variable tokens suit in-game adjustments.
- Familiarity: Mirrors real-world assets (e.g., gold for holding, dollars for spending).
Challenges
When hype fades, governance tokens face the "Why hold this?" problem. Solutions include:
- Dilution Protection: Staking rewards in the same token (illusionary "free money").
- Dividends: Share P2P trading fees (e.g., STEPN’s potential $0.003/day per GMT staked).
- In-Game Utility: Axie added AXS breeding costs—burning tokens to boost scarcity.
Without value accrual, governance tokens risk abandonment.
Single-Token Model
Rare but promising, this approach uses one primary token as the crypto/game bridge.
1. Variable-Supply Single Token
- Mechanism: Link in-game currency (e.g., Runescape’s gold) to crypto via a liquid market (gold ⇄ USDC).
- Pros: Simplicity; avoids complex tokenomics.
- Cons: Lacks speculative appeal for investors.
2. Fixed-Supply Single Token
Design:
- Fixed token (e.g., SAND) as the investable asset.
- In-game "soft currency" pegged to it via a DEX (e.g., wood ⇄ SAND).
Value Accrual:
- Dividends: Stake to earn ETH/USDC from marketplace fees.
- Deflation: Burn tokens for high-tier upgrades, increasing scarcity.
Advantages:
- Purchasing power grows over time (unlike inflationary in-game items).
- Early adopters earn more, while latecomers still profit.
This model outperforms dual-token systems by centralizing value in a deflationary asset while retaining gameplay flexibility.
Hybrid Approach?
A potential middle ground:
- Use fixed-supply tokens for high-value burns (e.g., rare upgrades).
- Employ variable tokens for routine transactions.
This blends the investment appeal of dual-token models with the simplicity of single-token systems.
FAQs
1. Which model suits indie developers?
Single-token (variable-supply) minimizes complexity but may struggle with fundraising. Dual-token attracts investors but demands careful balancing.
2. How to prevent token dumps?
Anchor fixed-supply tokens to irreversible utility (e.g., burns for legendary items). Dividends from fees also incentivize holding.
3. Can NFTs replace utility tokens?
Yes—but NFTs alone lack liquidity. Pair them with a fungible token for smaller transactions (e.g., crafting materials).
4. Is governance essential?
Only if decentralized decisions add value. Most games benefit more from tokenized gameplay than voting rights.
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Conclusion
Dual-token models dominate today, but fixed-supply single-token designs offer untapped potential. By merging speculative assets with deflationary mechanics and dividend streams, games can sustain long-term value—without compromising gameplay.
The future lies in hybridization: borrowing the best from both worlds. As crypto gaming matures, expect more innovation at this intersection.
👉 Deep dive into crypto-economics
Editor: Felix