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Tokenomics

The thing that I think is more interesting, personally, is that there are different fundamentals in crypto. The underlying elements that make a cryptocurrency valuable, from a token’s supply to how it’s issued to if it is designed to be inflationary or deflationary to its utility all come together to create what’s known as its tokenomics, a portmanteau of token + economics.

Tokenomics are key because a project that has smart and well-designed incentives to buy and hold tokens for the long haul is more likely to succeed. There are blockchains with finite amounts of tokens like Bitcoin - the supply will be capped at 21 million bitcoin. Scarcity can be one factor that creates value. By contrast, Ethereum allows a limitless amount of ether, its native token, to exist. That said, each one has mechanisms in their design to control the supply or new coins created and each has a different value proposition, or utility, that makes it unique.

In stock analysis, the focus is often on earnings per share; in crypto analysis, it typically comes down to supply and demand for the token directly.

  • Mining and staking
  • Yields
  • Token burns
  • Limited vs unlimited supplies
  • Token allocations and vesting periods

Fair Launch Cryptocurrency​

Despite the professed egalitarianism of cryptocurrency, new token distributions can skew in favor of private investors, the founders of the token or those who have been tipped off about a new crypto investment before launch.

Check token distributions of popular coins and you may be shocked to learn that huge swathes of so-called decentralized networks are reserved for early investors or founders, leaving the general public as second-class investors.

The promise of a “fair launch” remedies these inequalities. The concept refers to projects that provide everyone with an equal chance of acquiring tokens, no matter their status, meaning that no party is privileged to an investment above any other.

Fair launches gained popularity among those who think the market is rigged against them, jaded by whitelists, venture capital allocations and pre-mines that skew favor to the few in the know over the general population.

What Is a 'Fair Launch' in Crypto?

Fair Launch Coins List | Messari

Inflationary vs Deflationary Crypto Assets​

Deflationary crypto assets usually have a fixed limit on the total coin supply, which increases purchasing power over time. Inflationary crypto assets often have a flexible coin creation factor that is likely to reduce purchasing power over time.

Inflationary cryptos provide several advantages over deflationary ones. They encourage spending and discourage hoarding. Depending on the use case, they can enable greater liquidity and rapid adoption, either due to their utility or their functionality as a medium of exchange. In addition, they arguably offer a more flexible monetary policy than deflationary crypto assets and some fiat currencies. Moreover, token inflation can be adjusted to ecosystem needs.

Deflationary crypto assets encourage holding and discourage spending, increasing scarcity and adopting the asset as a store of value. Again deflationary crypto assets can protect themselves from inflation, hyperinflation, and stagflation and retain their value over time. A reduction in token supply may counteract inflationary pressures caused by external factors, including government policies or economic incidents.

Inflationary Vs Deflationary Crypto | ZebPay India

Inflationary vs. deflationary cryptocurrencies, Explained

Inflationary and Deflationary Cryptocurrencies: What’s the Difference?

Token Unlocks​

Cliff Unlocks - Tokens are held in a locked state until a specific event or date occurs, after which they will all be released at once

Linear Unlocks - Tokens are released at a steady, fixed rate over a period of time. For example, if 30% of tokens are set to be unlocked within a month. Then roughly the token will be releasing 1% per day, or in some cases, it will be releasing every x% per transaction block if they are vested in a smart contract

Token unlocks