What is Dual-Token Model (Two-Token Economy)?
Let's find out Dual-Token Model (Two-Token Economy) meaning, definition in crypto, what is Dual-Token Model (Two-Token Economy), and all other detailed facts.
The dual-token model, also known as the dual-token economy or the two-token economy, is a system used for crypto projects that utilize two types of tokens. The first type is used for utility purposes and helps complete specific roles or activities within the network. The second type is a security used to raise project funds.
The idea of adopting the dual-token model is to bypass issues related to regulation. The whole crypto project ecosystem is separated by the two tokens, which allows for better asset utilization. The security token is issued to adhere to regulations, while the utility of the other token may vary depending on the project.
The dual-token economy system is often adopted because the US Securities and Exchange Commission (SEC) does not have a clear framework or approach toward cryptocurrency assets. As of yet, crypto assets are not as clearly defined as traditional bonds or securities.
The SEC’s Framework for “Investment Contract” Analysis of Digital Assets has established a way to register tokens of blockchain projects as securities. The framework provides conditions of compliance for the projects to ensure they adhere to the regulations.
If a project wants the token to be considered as a security, it must ensure that the asset offers real-world utility and profit for the investors and token holders. Furthermore, the project must be completely decentralized. The SEC will only consider tokens as securities if they meet these requirements.
The two-token economy model also allows projects to incentivize the investors and token holders. They may offer more perks than their competitors. The dual-token model helps ensure better features, functionalities, and upgrades for the end-users.
Some of the projects that utilize the dual-token economy system include MakerDAO, Centric, and Anchor. One of the best-known two-token systems is the Ethereum-based NFT gaming project Axie Infinity. The project relies on two tokens - SLP and AXS.
The SLP token, which stands for Small Love Potion, acts as the utility token. It allows players to complete in-game activities. Using SLP, they can purchase or breed Axies, the in-game pets.
AXS is the governance token with a capped supply of 27 million. It provides both players and investors with the ability to buy or trade the tokens on crypto exchange platforms. The AXS token also allows holders to participate in in-game governance. Holders are able to stake the tokens on the platform which yields them passive rewards.