a16z latest long article: The most underrated type of token, not for speculation
Source: A16z Crypto by Tim Roughgarden, Eddy Lazzarin, Miles Jennings, Scott Duke Kominers Compiled and organized by: bitPushNews In our article on token classification, we introduced seven types of tokens, including web tokens, collectible tokens, and meme coins. Among them, the least explored and underappreciated is Arcade Token: a token with a relatively stable value within a specific software or product ecosystem, usually managed by an issuer (such as a company). Basically, Arcade Tokens are the blockchain equivalent of assets people are already familiar with in the real world: air miles, credit card points, in-game coins, etc. What all of these assets have in common is that they are all internally circulated currency to support the operation of a market economy: for example, frequent flyer miles and reward points can encourage brand loyalty and are used to buy tickets and upgrades; in-game coins can be used to buy and sell items in video games. Although companies have been using these assets for decades, almost all previous instances have run on centralized databases, limiting ownership, portability, and user choice. Arcade Tokens based on public chains are different; they are open, interoperable, and composable, which provides a new set of market design advantages. This article aims to answer the most common questions we receive about arcade tokens: what they are, what they do, why are they valuable, how builders use them, the design trade-offs they involve, and the opportunities they present. What are Arcade Tokens (Arcade Tokens)? At the technical level, an arcade token is a digital currency designed for consumption within its associated application ecosystem — its supply and demand are managed flexibly to maintain price stability. Please first think of them as currencies in the digital economy. So where did the term “arcade token” come from? Whether you've been to an arcade arcade or not, you're probably familiar with the concept: you walk into an arcade; exchange cash for coins, usually physical; then use those tokens to play a few rounds of “Bumblebee,” “Crocodile Panic,” or other games you like. These tokens allow you to participate in the arcade's economic activities. The arcade hall analogy clearly illustrates how these tokens work: arcade tokens have a relatively stable value within the economic system to which they belong — whether within a single service or between multiple services. The relative stability of the value of arcade tokens distinguishes them from other types of tokens, such as tokens that derive value from the operation of an underlying asset (such as asset-backed or collectible tokens), the operation of a decentralized network market (such as a network token), or speculative investments in a specific entity (such as company-backed or securities tokens). As funny as the name sounds, arcade tokens are a powerful, programmable economic primitive — they're the key to unlocking a new field of crypto design. What is not an arcade token? Once again, the most substantial difference between arcade tokens and other types of tokens is that arcade tokens are not meant for investment or speculation. Unlike network tokens or securities tokens that people usually earn in anticipation of a return on investment, arcade tokens are used for spending. People sometimes refer to arcade tokens as “functional tokens” because they are designed to provide, um, functionality. We avoid using this label because it suggests that other types of tokens lack functionality, which is by no means true. (See our “Defining Tokens” article for more information.) Alternative names for arcade tokens can include “points” (although in common parlance, this usually means that relevant records are kept on a private ledger rather than on a public chain) and “loyalty tokens” (which only describe a specific application). This doesn't mean that the value of an arcade token will never change—as described below, the price of an arcade token may fluctuate slightly over time. However, arcade tokens usually provide an unlimited supply at current prices, and do not provide, promise, or imply financial returns. This means they are generally unsuitable as investment products and are therefore generally not subject to US securities laws. What are the benefits of arcade tokens? Why should builders consider using them? Arcade tokens enable builders to create and distribute value in the digital economy. Crucially, this ability to create and distribute value can motivate user behavior, drive early growth, and create network effects — without relying on external capital or speculative demand. This intuition is simple, and once again matches the arcade analogy: if you run an arcade, you probably want to control the supply of tokens...
