Token economics (or tokenomics) is the study of a new type of economy that can be defined as the design of a particular ecosystem in a blockchain environment. There are as many ecosystems as startups and projects in the blockchain industry, where tokenization is a popular process. Designing an ecosystem requires a careful analysis of the token-flow.
What is a Token?
The central element of this economy is the token. You have probably heard or read many times that the term coin is used for certain cryptocurrencies, and the term token is used for others.
Tokens are all those cryptocurrencies that use someone else’s blockchain for their work. Take the Ethereum blockchain for example. Ethereum is designed to be customizable and flexible so that not only transaction notes can be written on its chain, but also any other computer code that can be executed. The main advantage of Ethereum is that it has implemented so-called smart contracts. It is code for EVM (Ethereum Virtual Machine), an environment for executing code written in a smart contract.
Tokens are nothing but units of value derived from smart contracts on one of the existing blockchains. Today, the vast majority of tokens rest on the Ethereum platform. Tokens are created and distributed to the public through the Initial Token Offer (ICO), which is a means of financing project development through the issuance of a new cryptocurrency or token.
What is the concept of token economics?
The token is the core of this new type of economy. Token economics cares about how value is created, how to distribute and circulate it among your community members, what are the mechanisms to consume the tokens, actually, you will need to set up a delicate financial model to make it work.
Token economics provides the possibility of working with other kinds of tokens beyond just currency. This means that token economics exists to ensure tokens in whatever form their usage in the ecosystem is intended.
Token economics mostly focuses on token application, token supply, and token validation. Token economics explains token usage and its behavior, not only while conducting a transaction but after its accomplishment.
The main features of a well-developed token are:
- utility within the ecosystem
- resistance to inflation
- scalability of usage
- high value
- presence on exchanges
- potential to increase in usage
Models for the token economics
Models for token economics are built for launching new cryptocurrencies. Designing an ecosystem requires a careful analysis of the token-flow. Plenty of projects have badly designed ecosystems and we can provide you professional help to avoid the collapse of the ecosystem.
While developing the most suitable model a detailed analysis is required. Blockchain solution for DeFi has been announced as the new crypto revolution.
Token economics must consider the following analysis:
- Token Allocation
- Public Relations & Branding
- Business Model
- Legal Side
- Token Type and Structure
- Utility vs Security
- Token flow
- Developing on platform