A16z: 'Arcade Tokens' Could Boost Crypto Projects Like Airline Miles

A16z: 'Arcade Tokens' Could Boost Crypto Projects Like Airline Miles

More crypto projects should consider employing blockchain-based equivalents to airline miles to expand their user base and bolster their economies, according to executives at venture capital firm a16z. In a report released on Thursday, a16z highlighted “arcade tokens” as an underutilized token type in the crypto space. These tokens, akin to airline miles, credit card points, or in-game currencies, maintain a relatively stable value within a defined software or product ecosystem. They are designed to facilitate specific actions within that ecosystem, rather than being speculative assets.

“While arcade tokens aren’t a universal solution, they are a fundamental component in the evolution of crypto networks,” stated a16z researchers Scott Duke Kominers, Chief Technology Officer Eddy Lazzarin, and others. “Just as stablecoins unlock new forms of commerce, and network tokens enable decentralized value-sharing and governance, arcade tokens can power digital economies at scale.”

Arcade Token Applications

One example cited by a16z is the hospitality-tech startup Blackbird and its native $FLY token. Blackbird launched a Web3 payment platform for restaurants in mid-2024, with $FLY designed to reward users and incentivize service adoption. “Blackbird’s $FLY token enables users to redeem it at participating restaurants, with this redemption process managed on a purpose-built blockchain layer powered by a network token.”

The report also illustrated other potential applications: “A decentralized computing network might utilize a network token for security and incentives among compute providers, while employing an arcade token to foster network effects within its customer base. Frequent flyer miles and rewards points, for example, can encourage brand loyalty and facilitate flight and upgrade purchases; digital gold allows for item transactions within a video game. Unlike tokens that grant ownership rights in the underlying ecosystem, arcade tokens provide access to specific applications or services, with their market value programmatically controlled.”

The report further emphasized that arcade tokens offer significant benefits for “spend-centric economies or physical-world integrations.”

Stablecoins vs. Arcade Tokens

The report acknowledged that while stablecoins can serve similar functions, arcade tokens offer a unique flexibility. Issuers can effectively “print arcade tokens on demand” to stimulate ecosystem growth through grants, user subsidies, and developer incentives, encouraging users to remain within the economy rather than spending elsewhere.

However, the report cautioned that arcade tokens are not suitable for every project, particularly those in speculative environments or those with well-established tokens and ecosystems. “For example, layer one blockchain networks with their own network tokens generally do not require arcade tokens to function.”