Dual-Token Model

Definition ∞ A dual-token model utilizes two distinct digital tokens within a single blockchain ecosystem for different purposes. Typically, one token serves as a utility token, facilitating network operations, paying transaction fees, or granting access to services. The second token often functions as a governance token, granting holders voting rights on protocol upgrades and strategic decisions. This separation of utility and governance aims to create a balanced economic structure and incentivize long-term participation.
Context ∞ Dual-token models are a common design choice for decentralized autonomous organizations and many DeFi protocols, seeking to align incentives among various stakeholders. The valuation and interaction between these two tokens can be complex, subject to market dynamics and protocol-specific mechanics. Discussions frequently center on the effectiveness of these models in promoting sustainable growth and preventing governance centralization. Future refinements may explore dynamic token issuance and burning mechanisms to optimize economic stability.