# Two Tokens, One Ecosystem

XYO Layer One uses a dual-token model to create a powerful, scalable blockchain ecosystem optimized for DePIN, data, and AI applications. This structure separates the foundational and transactional layers of the network, ensuring long-term sustainability without compromising speed or usability. The two tokens—$XYO and $XL1—each serve a distinct purpose that contributes to the health and growth of the network.

$XYO is a deflationary token with a fixed supply. It is designed for [staking](/xyo-layer-one/staking.md) and securing the network, offering long-term value alignment and stability. Token holders who stake $XYO contribute to the structural integrity of the blockchain, reinforcing trust and decentralization across the ecosystem.

$XL1, by contrast, is the utility token that powers day-to-day activity on XYO Layer One. It is described as inflationary, but this inflation is deliberately restrained. The inflation rate approaches 0.7% per year. $XL1 is used for gas [fees](/xyo-layer-one/architecture/transaction-fees.md), smart contract execution, real-time rewards, and other core functions of the blockchain. XL1 is effectively deflationary through active use. This design ensures that XYO Layer One maintains an economic balance, even while supporting high-throughput applications.


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