Monolithic tokens create governance capture. A single asset used for staking (to secure the sequencer) and voting creates a conflict where validators vote for protocol changes that maximize their staking yield, not network utility. This is the principal-agent problem that plagues monolithic L1s like Ethereum and Solana.
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Why Two-Token Models (Gov + Utility) Are Inevitable for ZK-Rollups
Monolithic tokens create a fatal misalignment between users and governors. This analysis argues that separating governance rights from operational utility (sequencer fees, gas) is the only viable economic model for sustainable, high-performance ZK-rollups.
introduction
THE INCENTIVE MISMATCH
The Monolithic Token is a Governance Trap
A single token for both staking/security and governance creates irreconcilable conflicts that cripple a ZK-Rollup's evolution.
ZK-Rollups require separate utility tokens. The sequencer fee token must be optimized for low volatility and high liquidity to pay for L1 settlement, mirroring Ethereum's ETH for gas. The governance token must be decoupled to make decisions on protocol upgrades and treasury allocation without distorting the core economic engine.
Starknet's STRK experiment proves the point. Its initial airdrop to stakers created immediate sell pressure, divorcing token price from protocol usage. A pure governance token like Arbitrum's ARB, while imperfect, avoids conflating security subsidies with community voting power.
Evidence: Analyze Celestia's TIA model. The token secures data availability (utility) but governance is minimalistic by design, preventing stakers from voting on inflationary policies that would devalue the very asset securing the chain.
key-trends
GOVERNANCE VS. GAS ECONOMICS
The Inevitability Calculus: Three Forces Driving the Split
The monolithic token model is a legacy design that fails under the unique pressures of a ZK-Rollup, creating an unavoidable schism between governance and utility.
01
The Security Subsidy Problem
A single token forces sequencer revenue (gas fees) to subsidize validator security (staking rewards). This creates a direct conflict: lowering fees to attract users cannibalizes the staking yield securing the chain.
- Economic Misalignment: High staking APY requires high, volatile gas fees, punishing users.
- Vulnerability to MEV: Sequencers are incentivized to maximize extractable value to boost rewards, compromising chain neutrality.
>20%
APY Required
Volatile
Fee Market
02
The Capital Efficiency Trap
Locking a high-value governance token for staking sequencers or provers creates massive, unproductive capital drag. This is antithetical to rollups, which are meant to be lean execution layers.
- Billions Idle: A $10B+ market cap token with 30% staked locks ~$3B that could be deployed in DeFi.
- Solution: A separate, low-volatility utility token (e.g., for gas) decouples security capital from operational costs, mirroring Ethereum's post-EIP-1559 fee burn mechanics.
$3B+
Capital Drag
0% Yield
On Gas Token
03
Regulatory & Product-Market Arbitrage
A pure utility token is a superior product for payments and a clearer regulatory asset. Separating it allows each token to be optimized for its core function.
- Product Fit: Users and dApps want a stable, predictable unit for gas, not a speculative governance asset.
- Regulatory Clarity: Following the Howey Test, a utility token with no profit expectation is less likely to be deemed a security, unlike a governance token with staking yield. This is a lesson from SEC v. Ripple.
Howey Test
Clarity
Predictable
Gas Costs
deep-dive
THE INCENTIVE MISMATCH
Anatomy of a Conflict: Why One Token Fails
A single-token model for ZK-rollups creates an irreconcilable conflict between security funding and ecosystem growth.
Sequencer revenue is insufficient to fund decentralized provers and validators at scale. A pure utility token must be sold to pay for compute, creating constant sell pressure that crushes its value as a governance asset.
Governance and utility are adversarial. A token optimized for staking security (high inflation, low velocity) directly conflicts with a token optimized for ecosystem fees (low inflation, high utility). This is the core flaw of monolithic token design.
Arbitrum's ARB/ETH divergence proves the point. ARB, a pure governance token, trades at a fraction of the chain's fee revenue value captured by ETH. This demonstrates the market's discount for tokens without utility cash flows.
The two-token model is inevitable. Protocols like Axelar with AXL/WTA and dYdX with DYDX/USDC already separate governance from utility. ZK-rollups will follow, using a staking token for security and a gas token for fees, mirroring Ethereum's ETH/EIP-1559 structure.
TOKEN DESIGN ARCHETYPES
ZK-Rollup Token Model Spectrum: From Monolithic to Modular
Compares token model architectures for ZK-Rollups, analyzing the trade-offs between capital efficiency, governance capture, and economic security.
| Core Feature / Metric | Monolithic (Single Token) | Hybrid (Gov + Utility) | Modular (Sovereign + Shared Sequencer) |
|---|---|---|---|
Token Count | 1 | 2 | 2+ |
Primary Use Case | Gas, Staking, Governance | Gov Token: Governance, Utility Token: Gas/Fees | Sovereign: Security, Shared: Sequencing Fees |
Governance Capture Risk | High (Stakers = Voters) | Medium (Decoupled, but utility token holders excluded) | Low (Explicit separation of powers) |
Capital Efficiency for Validators | Low (Stake locked for security & voting) | High (Utility token for ops, gov token for voting) | Highest (Security via sovereign token, ops via shared token) |
Sequencer Revenue Model | Protocol captures 100% of MEV & fees | Utility token captures fees; Gov token may get a share | Shared sequencer (e.g., Espresso, Astria) captures sequencing fees |
Example Implementation | zkSync Era (ZK token proposed) | Starknet (STRK gov, ETH gas), Scroll (proposed model) | Dymension RollApps, Eclipse, AltLayer |
Time to Finality Dependency | On own fraud/validity proofs | On own validity proofs | On settlement layer (e.g., Celestia, Ethereum) + shared DA |
counter-argument
THE INCENTIVE MISMATCH
The Single-Token Defense (And Why It's Wrong)
A single-token model for ZK-rollups creates an intractable conflict between security, governance, and economic utility.
Single-token models create misaligned incentives. A token must secure the chain via staking, govern its parameters, and serve as a medium of exchange. These functions have opposing economic demands, forcing a compromise that weakens all three.
Security requires illiquidity, utility demands liquidity. Validator staking needs long-term lockups for safety, but a native gas token must be liquid for users and dApps like Uniswap. This conflict degrades both the chain's security budget and its economic activity.
Governance power corrupts monetary policy. A token holder voting on fee parameters or sequencer selection, as seen in early Optimism governance, directly influences their own token's value. This creates perverse incentives that a pure utility token avoids.
Evidence: The market has already decided. Major rollups like Arbitrum and Starknet have adopted two-token systems, separating governance (ARB, STRK) from gas payment (ETH). This is the inevitable architectural pattern for sustainable, credibly neutral L2s.
takeaways
THE TOKENOMICS IMPERATIVE
TL;DR: The Non-Negotiable Blueprint
The monolithic token model is a governance and economic liability for any serious L2. Here's why a bifurcated approach is the only viable path forward.
01
The Problem: The Governance Capture Bomb
A single token for staking/sequencing and governance creates a systemic risk where validators can vote to increase their own profits, undermining network security and user trust.\n- Security/Governance Conflict: Sequencers with voting power can approve proposals that reduce slashing or increase their rewards.\n- See: Early Delegated Proof-of-Stake flaws where block producers controlled protocol upgrades.
>51%
Attack Vector
0
Formal Separation
02
The Solution: Sequencer Bond (Utility Token)
A pure utility token, staked as a bond for the right to sequence transactions and produce blocks. Its value is tied to L2 usage, not political power.\n- Economic Security: Bond size secures the chain; slashing for liveness faults is clean and apolitical.\n- Fee Capture & Burn: Transaction fees are paid in this token, with a portion burned, creating a direct value accrual loop from network activity.
$100M+
Typical Bond
Deflationary
Fee Sink
03
The Arbiter: Governance Token
A non-stakable, vote-only token held by a broad community (users, devs, delegates) to control protocol parameters and upgrade the sequencer set.\n- Pure Signaling: Separates economic power from political power, aligning upgrades with long-term health.\n- Treasury Control: Governs the community treasury (e.g., for grants, security audits), funded by a portion of sequencer fees.
1 Token
1 Vote
DAO-Controlled
Treasury
04
The Precedent: StarkNet & zkSync
Leading ZK-Rollups are already architecting this separation, validating the model's necessity for sustainable scaling.\n- StarkNet: STRK for governance/protocol fees, ETH for gas. zkSync Era: Future ZK token for governance, ETH for gas/staking.\n- Avoids Regulatory Blur: Clear utility separation reduces the risk of being classified as a security under frameworks like the Howey Test.
2
Major Protocols
Dual-Token
Confirmed Path
05
The Economic Flywheel
The two-token model creates a self-reinforcing cycle of security, governance, and value capture that a single token cannot achieve.\n- Utility Token Demand: Driven by sequencer bond requirements and fee burn from rising L2 activity.\n- Governance Token Value: Derived from control over a growing treasury and a high-utility, economically secure underlying chain.
Virtuous
Cycle
Aligned
Incentives
06
The Alternative is Obsolescence
Monolithic token L2s will be outcompeted on security guarantees, community alignment, and long-term economic design. They become legacy infrastructure.\n- Investor Clarity: VCs and protocols deploy on chains with credible, long-term tokenomics.\n- See: The Evolution of L1s from Bitcoin (single) to Ethereum (ETH for gas, non-tradable consensus weight) to modern modular chains.
High
Design Risk
Non-Starter
For Institutions
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