More crypto projects should consider using a blockchain-based equivalent of airline miles to grow their user base and power their economies, according to executives from venture capital firm A16Z.
In a report Published On Thursday, A16Z said that one of the most underappreciated types of tokens is called “arcade token.”
These tokens maintain a relatively stable value within a specific software or product ecosystem, similar to airline miles rewards, Credit card points or in-game currencies. They enable users to perform specific functions within that ecosystem, instead of being held for speculation.
“Although arcade tokens are not for every use case, they represent a critical building block in the evolution of crypto networks.”
“Just as StableCoins unlock new forms of commerce, and network tokens enable decentralized value sharing and management, arcade tokens can power digital economies of scale,” said A16Z researcher Scott Duke Komimers, chief technology officer Eddy Lazzarin and others.
Arcade token usage
One such project, according to 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 spur adoption of the service.
“Blackbird’s $fly token allows users to redeem it at any participating restaurant, and the redemption behavior is managed in a blockchain-built layer powered by a network token,” the report reads, as it points to other use cases:
“A decentralized computing network could, for example, use a network token for security and incentives to compute providers, while using an arcade token to establish network effects among customer bases.”
“Frequent flyer miles and reward points, for example, can encourage brand loyalty and be used to make flight purchases and upgrades; digital gold can buy or sell items in a video game,” they explained, adding:
“Rather than giving the owner ownership rights in the underlying ecosystem, arcade tokens give holders the ability to access or use certain applications or services; critically, their market value is designed to be programmatically bound. “
The report also argued that arcade tokens could provide important tools for “spending-centric economies or integrating the physical world.”
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Some of the advantages of using arcade tokens include price stability and usability, making it easy for users to understand what they spent, simple accounting, and simplifying tokenomics for issuers.
StableCoins and other assets compared to arcade tokens
The report also highlighted that while StableCoins can be used for similar purposes, the flexible dynamics of arcade tokens present other opportunities.
For example, issuers can essentially “print arcade tokens on demand” to support the growth of the ecosystem, such as grants, user and developer subsidies, while also encouraging users to stay within the economy, instead of spending funds elsewhere.
However, the report outlines that not all projects need to use them, as they lack utility in speculative environments or when a network or platform already has a well-established token and ecosystem.
“For example, Layer One Blockchain Networks with their own network tokens generally do not need arcade tokens to operate,” they argue.
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