The importance of tokenomics
In this article we will talk about the importance of tokenomics for project research. Let’s start!!!!
Have you ever heard of the term “tokenomics” while venturing into the exciting world of cryptocurrencies and blockchain? If you find yourself a little lost on this term, don’t worry! In this article we are going to find out the secrets behind tokenomics and how they relate to the analysis of blockchain projects. Get ready for an informative journey that will open the doors to a new level of understanding in the crypto space.
What are tokenomics?
The word tokenomics comes from the combination of the words “token” and economy”, referring to the economic system related to the use, management, distribution, creation and circulation of tokens in a blockchain network.
Therefore, studying the tokenomics of a blockchain project can make us realize the potential that that project has and be able to invest in it, or quite the opposite, perhaps when studying it we see that it is not worth investing in it.
What is a tokenomics composed of?
The tokenomics of a project is made up of several parts that we have to take into account when investigating a project.
One of them is the supply of tokens:
Total supply of tokens:
Refers to the total number of coins that will exist, including coins that are in circulation, as well as those that are out of circulation.
Maximum token supply:
It is the maximum number of tokens that can be created, representing the maximum number of tokens that will exist. Taking into account that there are coins like Ethereum that have a variable supply.
Circulating supply:
Refers to the tokens that are currently available to be traded in the market.
Token issuance:
It is the process of creating and issuing new tokens.
Token burning:
This term refers to withdrawing tokens from circulation, thereby reducing the total supply of tokens. There are several types of burns, one where they are permanently removed from circulation and another where they are sent to a 0X000 wallet.
Another important thing to keep in mind is the distribution of tokens. Here we would have to look at what percentage is allocated to the team, staking, marketing, burning, etc.
The distribution of tokens is tied to issuance and supply, as they help determine supply and demand.
The utility of the token.
This is another very important thing, since a token with no apparent usefulness is not the same as another that can help the sustainability of the project. These tokens can be used to access services, resources, vote on decisions, reward users, etc.
Tokenomics also includes ICOs, which are a fundraising method used by blockchain projects, or IDOs, where financing takes place through a decentralized platform.
Another financing method that is being carried out is Security Tokens Offering (STO). This type of token represents the ownership of a company, so you will have access to detailed information about the company if you invest in it.
Another thing to take into account is project governance, which refers to the set of processes and mechanisms through which decisions are made and different aspects of the project are managed.
Governance can be centralized, where decisions are made by a central unit, or decentralized, where decisions are made by the community that holds the governance token.
Project governance involves decision making; protocol changes; resource management, where you can decide how the project’s financial resources are used; community participation, where they can propose their ideas; Transparency, since the community is informed of the decisions that are made, which contributes to trust in the project.
Tokenomics are essential to ensure good sustainability of the project, that is why it is essential to study the tokenomics of the project that we plan to invest in, taking our time to research it and asking the necessary questions in the project forums, such as Telegram, Discord, etc.
The more we investigate the tokenomics of a project, the more confident we will be in investing our money.
I hope that with this article the importance of tokenomics in project research has become more or less clear.
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