During the GameFi boom of 2021, projects realized a problem If they paid rewards in Governance tokens, the reward pool would dry up quickly. Solution is the Dual Token Model.
🔸 Structure of Dual Token Model:
Governance Token: Fixed supply. Used for voting, major upgrades. Treated as the Stock storing the project value.
Utility Token: Infinite supply. Used for daily rewards to players. Treated as Cash for spending.
🔸 This model works well during hyper growth, new users > old users dumping. But it contains a fatal design flaw Hyperinflation.
Players grind games to pay bills. They earn Utility Tokens and sell for USDT immediately.
Supply Demand Imbalance. To maintain the price, the project needs players to Burn the token. However, at peak saturation, the amount minted always vastly exceeds the amount burned.
The Death Spiral:
Utility Token price drops due to selling.
To maintain player income, the system must payout more tokens.
Inflation skyrockets 👉 Price drops faster 👉 Players panic sell.
Utility Token goes to zero. The game economy collapses.
🔹 If you participate in GameFi projects remember that:
For Utility Tokens never Hold longterm. They are mathematically designed to depreciate. If you Farm them, sell immediately or swap to Governance Tokens or Stablecoins.
A sustainable project must generate External Revenue, not just circulate money from new players to old players via printing inflationary tokens.
Are you holding a coin with Unlimited Supply in your wallet hoping for a x100 pump? Check the Tokenomics immediately.
News is for reference, not investment advice. Please read carefully before making a decision.
