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In tokenomics, three main types of token models are distinguished: single-token, dual-token, and multi-token models.

A token model defines both the number of tokens issued by a protocol and the roles they fulfill.

🔎 Learn more about the different roles: The utility of tokens

Single-token model

A single-token model relies on one token that covers all the needs of the ecosystem. Indeed, it can serve for payments, staking, governance, and rewards.

For example, the BNB token from BNB Chain illustrates this model well. It is used to pay transaction fees, participate in staking, obtain trading fee discounts on Binance, and access certain ecosystem features such as the Launchpad, while also playing a role in governance.

Advantages of the single-token model

  • Simplicity: a single token makes understanding, adoption, and overall user experience easier.
  • Unified liquidity: all value is concentrated in one token. This simplifies management and stabilizes exchanges. Thus, each transaction has less impact on the price, which limits volatility.
  • Value concentration: demand focuses on a single token, reinforcing its potential for appreciation.
  • Uniqueness: no risk of a second token being neglected, a common issue in dual-token models.

Disadvantages of the single-token model

  • Usage conflicts and inflation: when the same token must be both spent (payments, fees) and held (staking, governance, store of value), these functions come into conflict. A high price satisfies token holders but hinders daily usage, while a low price facilitates transactions but weakens the store of value. Additionally, the situation worsens when the same token is distributed as a reward: supply increases, value is diluted, and inflationary pressure intensifies. The single-token model therefore oscillates between two opposing dynamics: inflation to encourage participation and deflation to preserve value. This weakens its role as both a spending medium and store of value.
  • Monetary rigidity: it is difficult to define a clear policy. A deflationary model protects value but limits rewards. Conversely, an inflationary model stimulates usage but weakens value.

Dual-token model

A dual-token model introduces two distinct tokens with specific roles.

The most common case combines a utility token (fees, transactions, rewards) and a governance token (staking, governance).

More rarely, a utility token is combined with a security token, usually for regulatory compliance reasons. In this case, the security token represents an economic right (such as revenue sharing), while the utility token retains its functional role in the ecosystem.

For example, Axie Infinity separates SLP (in-game utility token, inflationary) and AXS (governance/staking, limited supply). Sky Protocol, on the other hand, combines a utility stablecoin (USDS) with a governance token (SKY).

Advantages of the dual-token model

  • Separation of uses: the utility token is designed for frequent spending and tends to be inflationary, while the governance token aims for scarcity and long-term value creation, with a more deflationary logic.
  • Stability: inflation of the utility token does not affect the governance token.
  • Monetary scalability: emissions of the two tokens can be adjusted separately without breaking the overall balance.

Disadvantages of the dual-token model

  • Usage complexity: two economic mechanisms to understand, two markets to follow.
  • Delicate balance: if one token loses value, the entire ecosystem is weakened.
  • Liquidity fragmentation: value and exchanges are divided between two tokens.
  • Technical overhead: more development, maintenance, and compliance.

Multi-token models

Some projects go further with three or more tokens, each having a specific function. This model is generally reserved for complex ecosystems.

For example, the Shiba Inu ecosystem perfectly illustrates a multi-token model. It includes:

  • SHIB: utility and community token, symbol of decentralized governance and community cohesion.
  • LEASH: rewards token, offering exclusive benefits (NFTs, land sales, priority access).
  • BONE: governance token, allowing members to vote via the “Doggy” DAO.
  • TREAT: dual-function token, serving both for rewards and governance.

Advantages of the multi-token model

  • Role differentiation: each function is optimized using a dedicated token.
  • Flexibility: suitable for complex ecosystems (DeFi, metaverse, gaming).

Disadvantages of the multi-token model

  • High complexity: the multiplication of tokens creates confusion and constitutes a barrier to adoption, with the risk of discouraging or losing certain users.
  • Multiple markets and rules: each token must have its own liquidity, listings, issuance, and compliance.
  • Strong liquidity fragmentation: dispersion among several tokens can lead to higher volatility.

Key takeaway

token model summary