From 9e8422e577be378a685b2fd6010b37e68e224102 Mon Sep 17 00:00:00 2001
From: =?UTF-8?q?BT3GL=20/ba=C9=AAt=C9=A1=C9=9D=C9=AB/?=
<1130416+bt3gl@users.noreply.github.com>
Date: Tue, 31 May 2022 16:13:55 -0700
Subject: [PATCH] Add a dir for tokenomics studies
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+## 📊 Tokenomics of DeFi Projects
+
+
+
+
+#### Tokenomics studies the factors that drive the demand for tokens. It includes:
+
+* math
+* supply vs. demand
+* incentives
+* value accrual
+* human behavior & game theory
+
+
+
+#### Questions to ask
+
+* How many tokens are in existence?
+* How many tokens will there be in total?
+* Who has the supply? WHEN can they sell?
+* How will the supply change over time?
+* What are their policies for changing?
+
+
+
+
+
+#### Things to watch out
+
+* The tokens were inflationary without enough utility.
+* Concentration of tokens by VCs & whales led to retail getting dumped on.
+* Understanding the market cap would show that it's impossible.
+
+
+
+
+#### Supply Metrics You Should Know
+
+* Supply: How many tokens exist NOW
+* Max supply: The most that can exist
+* Market Cap: Current Price * circulating supply
+* Fully Diluted MC: Price * max supply.
+
+
+
+For example, it's not a good sign that a circulating supply was only at 40%. That means the supply will increase by 60%.
+More coins created will put pressure on the price.
+
+
+
+
+Another example, Dogecoin is an inflationary token: its supply is increasing each year, and there's no CAP on the supply.
+This isn't good for Tokenomics because it's the opposite of Scarcity. Some coins can become deflationary when the supply DECREASES over time.
+
+
+
+#### Why Ethereum is ultrasound money
+
+* The merge to proof of stake lowers the inflation supply of ETH
+* EIP-1559 takes a bit of the transaction fees and burns it
+
+
+
+
+#### Allocation & Distribution
+
+How are the initial tokens distributed? There are roughly 2 ways:
+
+* Pre Mined:
+
+1. The team distributes tokens to itself.
+2. Distribution to insiders such as the team and venture capitalists
+
+In this case, VCs and Insiders could dump their tokens and cause a price crash.
+Vesting means when they're allowed to sell the tokens. You want to make sure that the early backers are INCENTIVIZED with the protocol long-term.
+
+* Fair Launch:
+
+100% fair. Everyone has equal access.
+
+
+
+
+
+
+
+#### What Drives the Demand for Tokens?
+
+
+* Utility (gas, fun, adoption)
+* Value Accrual (xStaking, governance)
+* The Memes and Narratives
+
+
+