Tokenomics is a kind of business plan for a cryptocurrency (token). It is a balanced economic model of the token, which takes into account the interests of all participants (investors, users, founders of the coin, developers, and so on). The process of tokenomics development is the process of finding the economic meaning of a token. The liquidity, value, and popularity of a token depend on how it will be demanded by different groups of people. In this article, we will discuss What Is Tokenomics & Tokenomics In Action.
Tokenomics is a document that describes the economic value of a token, how the token functions, and how the value of the token grows. The economic model of the token is based on a business model that has a mathematical representation and has been tested for applicability and internal consistency. The development of tokenomics is closely tied to the vision of the business goals of the founders of the token and/or cryptocurrency. Tokenomics need to be developed at the earliest stage so that it shows the problems of the business and helps avoid negative consequences. Tokenomics are part of the whitepaper, but can also be a separate document.
Strategic investors always study the tokenomics and very often double-check the calculations and the economic model of the token. To develop tokenomics, you need to have knowledge of macro and microeconomics, as well as technical knowledge of cryptocurrencies, blockchain technology and smart contracts. Now it makes sense to consider some important areas that are directly or indirectly related to the concept of tokenomics.
Regulation of cryptocurrency issuance
The team behind each project develops the rules governing how tokens are created, as well as how they are brought in and out of the network. Different projects take different approaches. Some projects include tokens held in reserve. These tokens can be added to the ecosystem later as a way to drive growth or pay for system maintenance.
However, a network such as Tether burned tokens in October 2018 to settle the value of the coin in the marketplace. The act of burning is a procedure in which currency is sent to a wallet whose address no one knows.
Is there inflation in the cryptocurrency world?
Cryptocurrencies are created on a blockchain and have predetermined, algorithmically created release schedules. This means that we can predict with some accuracy how many coins will be created by a certain date. For most cryptocurrencies, the release schedule can vary. But, as a rule, this procedure requires approval from many people and is quite difficult to implement. This approach provides comfort and security for crypto-asset owners. They know exactly how much of their assets will be released.