Dual-Token Economy: A Two-Coin Crypto System

Dual-Token Economy/Model (Two-Token Economy) is a project with two tokens, one of which is used for intranet utility and the other as collateral for fundraising.

What is Dual-Token Economy?

Dual-Token Economy is a term used to refer to cryptoprojects that offer two different types of tokens. It is done to avoid compliance issues and to separate the project ecosystem into two tokens for better usability.

Usually one of the two tokens is used as collateral to attract investment in a cryptoproject. The token strictly follows the rules for all securities (bonds or stocks). The second token is used in the network to perform other roles or actions, which usually vary from project to project.

The SEC problem is the main reason why cryptoprojects prefer to use the two-token economy model. The SEC does not clearly categorize crypto-assets, unlike securities, stocks or bonds, which have a clear clear position in the system.

The “investment contract” analysis system for digital assets gives digital projects the ability to register their tokens as a security and sets the terms of their operation in accordance with the rules.

In order to be registered as a security, a project must make sure that its tokens bring real benefit and profit to their owners and that the project is fully decentralized. If all conditions are met, the token is recognized as a security by the SEC.

The advantage of adopting the two-token economy model is that, unlike other projects, it offers many incentives for token holders and potential investors. By having two tokens, a crypto project can offer a better reward structure, features, upgrades, and functionality to end users.

A good example of this is Axie Infinity, an NFT project that offers two tokens, SLP and AXS. Both tokens are offered as rewards to users for participating in the game. “Small Love Potion,” or SLP, is a useful token with an unlimited supply that can be used by Axie Infinity players to perform in-game tasks. For example, to pay for breeding their Axies or to buy Axies on the in-game market.

At the same time, AXS is the ERC-20 control token for the Axie universe with a maximum supply of 27 million. AXS provides value to the Axie Infinity ecosystem, where players can buy the token directly on crypto exchanges, and AXS token holders can participate in in-game management activities and place their tokens on the platform for passive rewards.

There are many other projects based on the dual economy mechanism, such as VeChainThor, MakerDAO, Anchor and Filmio.

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