More crypto projects should think about using a blockchain-based equivalent of airline miles to grow their user base and boost their economies, in line with executives at enterprise capital firm a16z.
In a report published on Thursday, a16z explained that one of the crucial underrated token types in cryptocurrencies is named “arcade tokens.”
These tokens maintain a comparatively stable value inside a given software or product ecosystem, just like airline mileage rewards, bank card points, or in-game currencies. They allow users to perform specific functions inside this ecosystem reasonably than being held for speculative purposes.
“Although Arcade tokens will not be suitable for each use case, they represent a vital constructing block in the event of crypto networks.”
“Just as stablecoins unlock recent types of commerce and network tokens enable decentralized value sharing and governance, Arcade tokens can power digital economies at scale,” said a16z researcher Scott Duke Komimers, Chief Technology Officer Eddy Lazzarin and others.
Using Arcade Tokens
One such project, in line with a16z, is hospitality tech startup Blackbird and its native $FLY token. The project launched a Web3 payment platform for restaurants in mid-2024, with $FLY designed to reward users and drive adoption of the service.
“Blackbird’s $FLY token allows users to redeem it at any participating restaurant, and this redemption behavior is managed on a purpose-built blockchain layer backed by a network token,” the report said, pointing to other use cases:
“For example, a decentralized computer network might use a network token for security and incentives between computer providers, while an arcade token is used to ascertain network effects amongst the shopper base.”
“For example, frequent flyer miles and rewards points can encourage brand loyalty and be used for flight and upgrade purchases; digital gold may be used to purchase or sell items in a video game,” they explained, adding:
“Rather than granting holders ownership rights to the underlying ecosystem, Arcade tokens grant holders the power to access or use specific applications or services; crucially, their market value is designed to be programmatically limited.”
Source: a16z
The report also argued that Arcade tokens can provide essential tools for “spending-driven economies or integrations into the physical world.”
The advantages of using Arcade tokens include price stability and ease of use, making it easy for users to grasp what they’re spending, easy accounting, and simplifying tokenomics for issuers.
Stablecoins and other assets in comparison with Arcade tokens
The report also highlights that while stablecoins may be used for similar purposes, the flexible dynamics of Arcade tokens offer other opportunities.
For example, issuers can essentially “print arcade tokens on demand” to support ecosystem growth, comparable to through grants, user and developer subsidies, while encouraging users to remain within the economy reasonably than spend the funds elsewhere.
However, the report notes that they don’t must be used on every project as they lack utility in speculative environments or when a network or platform already has a well-established token and ecosystem.
“For example, Layer 1 blockchain networks which have their very own network tokens generally don’t require Arcade tokens to operate,” they argued.
