The dual-token model is a revolutionary concept in the world of blockchain systems. This innovative system is built on a single blockchain with two native tokens, each playing a unique role. One token serves as a means of payment while the other serves as a governance token. However, the functions of these tokens can vary depending on the specific project, but the fundamental idea remains the same – both tokens are crucial to the tokenomics of the system and support each other. This groundbreaking model has gained significant traction among newer generations of blockchain projects due to its numerous benefits.
Dual-token models are most applicable to ecosystems of decentralized products, and not to p2p decentralized systems of the first generation, such as, for example, Bitcoin. The ecosystem based on this model uses two tokens. One token is usually a base token, a governance token. It can also serve as a means of paying internal fees when sending transactions. If the blockchain on which the ecosystem operates uses the Proof-of-Stake (PoS) consensus mechanism or its variations, such as Delegated Proof-of-Stake (DPoS), then the underlying token is also required for staking, that is, it is a unit of computing power. The second token in dual-token models is the liquidity token. It can be with unlimited emission, but in this case, the ecosystem is unlikely to be able to cope with hyperinflation. More resistant to inflationary risks is the dual-token model, where a liquid token has a limited mission. In this case, as with Bitcoin, the supply of a liquid token decreases over time. This reduces inflationary risks and, in some cases, contributes to the creation of conditions for the emergence of deflation.
The main advantage of this model is the real financial motivation for ecosystem users to actively use its products and participate in the life of the community. This helps to keep the user within the ecosystem, and also increases the speed of liquidity flows between different products of the same ecosystem.
Dual-token models require careful consideration of the token economics of both tokens, which can be challenging to manage and balance. But if the tokenomics of the project is thought out and mathematically verified, then this model will contribute to the stable growth of the coin rate.
Example of Dual-Token Model Implemented in Decentralized Ecosystem
If you’re looking to understand the dual-token model, a visual example is often the easiest way to go about it. Enter MinePlex, a blockchain-based ecosystem launched in 2020. Boasting a range of decentralized services, including advanced payment solutions, a marketplace, and a business-focused cryptopayment gateway, MinePlex has quickly become a go-to for users looking to streamline their everyday lives.
At the heart of MinePlex’s ecosystem there are two tokens, XMine (MPX) and CrossFi (XFI). MPX serves as a non-volatile token that represents MinePlex’s blockchain computing power and is essential for generating new XFI tokens. On the other hand, XFI is a volatile utility token that provides access to MinePlex’s suite of services and products. The project team has set a target return on MPX staking at approximately 7% per month. In other words, the target average payback of one MPX coin is set at approximately 12 months. However, everybody should remember that XFI is a traded asset, and its value is subject to market forces, which can impact the return on staking.
As MinePlex’s user base grows, so does the demand for XFI, making the staking process more lucrative. MPX isn’t just about generating rewards – it’s also used for paying transaction fees. MPX can be achieved via exchange of XFI or PLEX (tokens of the previous version of MinePlex ecosystem). The nominal value of MPX is fixed at 0.01 USDT, making it immune to market volatility. So it’s a pegged token. XFI, as it was already mentioned, is a traded token and subject to market volatility. For example, if the XFI token is worth 1 USDT, converting it to MPX will yield 100 MPX.
MinePlex 2.0 utilizes the DPoS consensus protocol, which allows MPX holders to stake their tokens by selecting a validator and delegating their tokens. Once staked, the MPX is immediately put into operation, and the staker starts receiving rewards in XFI. Any coins obtained through staking can be withdrawn at any time, but it takes 15 days to withdraw MPX from staking to ensure the network’s stable operation.
The dual-token model of MinePLex serves as a stable and effective incentive for users to remain inside the ecosystem and actively use its services. It also ensures the smooth operation of the blockchain and a robust and efficient economy of the system.
MinePlex’s ecosystem includes the following list of services, all of them supporting XFI and PLEX:
- MinePlex Wallet App: A mobile application for iOS and Android that allows users to create wallets and securely store and manage MPX, XFI, MINE, PLEX, BTC, and USDT tokens with just one click.
- Explorer: A tool that allows access to all the information about transactions taking place in blockchain, track the price and turnover of the native tokens of the project, view all data on pools.
- Money: A a cryptocurrency-based electronic payment system for transacting within the MinePlex ecosystem and Mineplex.Payment. It allows users to store and use major cryptocurrencies, PLEX and XFI tokens, order cards, and make offline and online payments.
- Payment: Crypto-based acquiring platform for businesses. It enables businesses to develop and accept cryptocurrency payments with ready-made pages for accepting online payments in fiat and cryptocurrencies, MinePlex POS terminals, tools for creating custom payment pages, and more.
- Finance: A financial mobile platform providing access to banking and financial services online in euros, pounds sterling, PLEX and XFI tokens on a mobile phone from anywhere. The updated app is scheduled for launch in July 2023.
- Marketplace: An online platform where users can buy goods directly with PLEX and XFI tokens. On top of that, an innovative product staking tool allows users to get goods for a part of their cost. The marketplace is currently on an update.
The dual-token model assumes a synergistic effect of close ties between tokens. The higher the turnover and liquidity in services within the ecosystem, the stronger the demand for XFI as the main unit of this liquidity. The growth of demand for XFI pushes ahead users’ interest in MPX staking tokens. The higher the participation in staking, the more users are retained within the ecosystem and encouraged to actively use it. And this leads to a new increase in demand for XFI.
Another benefit of the dual-token model is improved liquidity. The utility token is traded on exchanges, involving market makers and increasing accessibility. This approach provides more opportunities for investors to buy and sell the token seamlessly, ensuring that the market remains robust and efficient.
Furthermore, the model incentivizes token usage, which ensures that the utility token retains value and is not affected by market fluctuations. Finally, the dual-token model provides improved governance, helping align the interests of the platform with those of its investors. This creates a more transparent and inclusive ecosystem.