1 vs 2 token model?


#1

Most crypto projects have 1 token but MakerDAO and Trustory both operate on 2 tokens. MakerDAO is separating the cryptocurrency from the governance token. Trustory is separating the underlying token from the utility token. In essence, both are separating the thing that will accrue value if the platform takes off from the underlying utility token of the platform. Interesting choice. I’m curious to to hear all the arguments for and against this.


#2

This is especially relevant in protocols that use staking (e.g. Proof-of-Stake consensus models). Rather than bundling the economic utility (i.e. staking and transactional) of the token into one, some protocols (e.g. Cosmos) are choosing to have a separate token for staking vs transactions.

The argument made here is that with 1 token, the upside is that the token has more liquidity because more utility is bundled into it, but this also creates less of an incentive for people to stake their tokens (because they want to use their tokens for transactional purposes). This could result in a weaker network security because it’s easier for attackers to accrue the necessary amount of tokens necessary to attack the system. For example, if only 21% of the tokens in the system are being used for staking and the rest for transactions, then it’s much easier for an attacker to attain >7% of those tokens and pull off a 33% attack.

Cosmos, for example, separates the staking token (“Atom”) from the transactional one (“Photon”). Atoms are only used for staking and not for fees or transactions. Instead, validators are incentivized to stake in Atoms to earn transaction fees and block rewards. Atoms are therefore analogous to ASIC hardware in proof-of-work — some resource you need to attain to participate as a validator. Moreover, new Atoms are generated and distributed as block rewards, so there is continuous inflation of Atoms. The argument is that this would incentivizes Atom holders to keep staking in order to avoid their holdings from being inflationed away. If a majority of validators are staking, it makes the above attack harder. On the other hand, Photon will be used for transaction fees and other transactional purposes.


#3

One risk of this approach, however, is a less clear message to users. Take Steem for instance. The platform (https://steemit.com/) is designed to be a Reddit/Medium hybrid on the blockchain. Among the benefits of the steem platform: popular content is rewarded with tokens. The pitch of “If you make good content, you will be rewarded with money” is a powerful and useful one for content creators in this day and age. However, Steem has two tokens: one that is purely money and one that is around reputation but you can also purchase with other money. This results in a muddled message to users. As a content creator, I no longer see Steem as a platform where I simply focus on my craft: I feel required to learn the complex two-token economics so that I can earn tokens for my work. Even if a 2-token system is simple at its core, there’s an activation energy required for the user to actually learn it all fully and feel like they know enough that they can use the end product well.


#4

Its depends on the nature of project. Two tokens model is ideal for asset backed projects, for instance Real estate debt tokens, gold backed tokens(digix), backed by crypto currency (makerdao), etc… The recent years, blockchain based companies raised vast majority of money with promise of stake in their project. But in reality, all these projects procedure to issue new tokens were fundamentally flawed because most of these companies violated USE security laws.

Recent SEC guide lines(SEC itself not clear yet), many companies changed their token model. Where they release two different tokens (security and utility), security tokens for assets and utility tokens for governance.

The most ideal approach to issue security token is to utilize one of the SEC exceptions from enrollment under the Securities Act of 1933. This implies utilizing the JOBS Act and picking either segment 506© of standard Regulation D, Regulation A+, Regulation Crowdfunding, or a blend of the three. This isn’t troublesome, and it is best to utilize one of the entryways that additionally handles the best possible due constancy, which incorporates speculator confirmation (Reg D just), Know Your Customer (KYC), OFAC check, and Anti-Money Laundering.

The second token is to develop a self-organizing community that will be vested in the growth of the platform ecosystem. This tokens are mainly issues early in the project development and allow token holders to govern the platform by staking their tokens.

Example:
Digix
DGX - Gold backed Token
DGD - Governance Tokne

Maker Dao
DAI: is a Stablecoin is a collateral-backed cryptocurrency
MKR: Governance Token


#5

Where is it mentioned that TruStory will use 2 tokens?


#6

In the FAQ. We purposefully haven’t talked much about the token because what’s more important is the information/claims made about crypto and the intrinsic motivations of people wanting to curate that information.

https://www.trustory.io/faqs/


#7

Another case where 2 tokens are used is on the Power Ledger platform. They are attempting to be a platform that would host various applications required for the buying/selling of electricity.

One of their coins, Sparkz, is pegged to the local currency of any country (that adopts Power Ledger) and it allows prosumers and consumers to transact units of electricity, while being shielded from the volatility of the cryptocurrency market (Sparkz is not available on any exchange and can only be used on the Power Ledger platform). Users can purchase Sparkz through Power Ledger using their local fiat currency (Sparkz is pegged to the lowest denominator of that currency).

On the other hand, Power Ledger is also attempting to cultivate network effects that will make their platform the one of choice for peer-to-peer energy trading. For that, they want to incentivize people to join their platform, do something called an “Asset Germination Event” (crowd-funding for renewable energy assets, on their platform). For this purpose, they have another coin POWR that can be traded on exchanges.

So my understanding is that token #1 (Sparkz) is used for day-to-day buying/selling of electricity without trying it to the volatility of the cryptocurrency market and token #2 (POWR) is used to attract people to the platform. They have reference POWR as a “protocol token” - the demand of the token should increase as the number of participants using the platform increases.

I’d like to see patterns across several more cases, but if I had to venture any broad take-aways, an argument for a 2-token system would be to allow users to trade ON the platform AND attract users TO the platform; the former appears to function somewhat like a stablecoin (?) in that it allows day-to-day transaction without the price swings in the market. And the latter coin would be used to incentivize people to join the platform.

Sources:

  1. https://medium.com/@sebnem/token-model-for-energy-part-1-c47b6f926bc3 (first comment from Power Ledger team)
  2. “Why does Power Ledger Need Tokens?” https://medium.com/power-ledger/why-does-power-ledger-need-tokens-92d8b9781536
  3. “Common Questions and Misconceptions about Power Ledger” https://medium.com/power-ledger/common-questions-and-misconceptions-about-power-ledger-8c7d0b819d7d

#8

very cool! TruStory also has a 2-token system: a global token and a token per category. The category tokens are used for day-to-day staking (backing a story, challenging a story, voting on a story) while the global token is how users enter the system.


#9

Does it mean that, let’s say, 1POWR = 10 Sparkz, and this ratio will always be the same in all countries despite price fluctuation of POWR?