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The Economic Value of Dual-Token Blockchains

Author

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  • Nicola Dimitri

    (Department of Economics and Statistics, University of Siena, 53100 Siena, Italy)

Abstract

It is standard for blockchain platforms to issue native tokens, or crytpocurrencies, that users must own to operate within the platform. Some blockchains, however, decided to issue two tokens, establishing a dual system, with one token typically for governance and the other for implementing functions on the blockchain, such as executing transactions or smart contracts. Therefore, the two tokens are used for different activities. Typically, owning the governance tokens gives the right to receive the other token for free, as a reward for participating in the blockchain decision-making and voting processes. However, both tokens can also be traded on some exchange nodes, which means that platform functions could be implemented even without owning governance tokens. In this paper, we discuss some economic fundamentals of dual-token blockchain platforms—in particular, how to establish their economic value and the market relative attractiveness of the two tokens. We do so by introducing some simple numerical indicators, based on prices, and traded circulating monetary quantities. Such indicators, which are meant to reflect the platform’s view on the tokens’ market desirability, could be computed in real time and used to support the platform’s policy making.

Suggested Citation

  • Nicola Dimitri, 2023. "The Economic Value of Dual-Token Blockchains," Mathematics, MDPI, vol. 11(17), pages 1-19, August.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:17:p:3757-:d:1230409
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    References listed on IDEAS

    as
    1. Lo, Yuen C. & Medda, Francesca, 2020. "Assets on the blockchain: An empirical study of Tokenomics," Information Economics and Policy, Elsevier, vol. 53(C).
    2. Shen, Zhuyi & Wang, Shibo & Yang, Jinqiang, 2023. "A note on the dynamic adoption and valuation theory in tokenomics," Finance Research Letters, Elsevier, vol. 56(C).
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    Cited by:

    1. Aggelos Kiayias & Philip Lazos & Paolo Penna, 2024. "Single-token vs Two-token Blockchain Tokenomics," Papers 2403.15429, arXiv.org, revised Jun 2024.

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    Keywords

    dual-token blockchains; economic value;

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