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@ -1,9 +1,7 @@
## 🍿 tokenomics for defi projects
### on projects
### projects
* [dydx tokenomics](https://docs.dydx.community/dydx-governance/start-here/dydx-allocations)
* [redacted cartel tokenomics](https://tokenomicsdao.substack.com/p/tokenomics-101-redacted-cartel-btrfly?utm_source=substack&utm_medium=email)
@ -13,80 +11,39 @@
---
### tl; dr
### supply
#### tokenomics factors
<br>
* math
* supply vs. demand
* incentives
* value accrual
* human behavior & game theory
<br>
----
#### main questions
<br>
* 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?
* **Circulating supply:** How many tokens are in existence (in the market)?
* **Max supply:** How many tokens will there be in total?
* **Total suppply:** all tokens already issued minus the ones that were burned/locked.
> If the circulating supply is low while the total and max are high: red flag as the value of your coins will get diluted away (more coins created will put pressure on the price).
> The monetary policy in crypto dictates whether a coin is inflationary or deflationary and by how much, as well as the overall consensus mechanism for the project.
<br>
---
#### concerns
<br>
* 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.
### liquidity and valuation
* **Fully diluted valuation:** How will the supply change over time?
* **Market cap**: Current Price * circulating supply
* **Fully Dilute:** Market cap: Price * max supply.
<br>
---
#### supply metrics
### distribution
<br>
* **Holders**: Who has the supply? WHEN can they sell?
* **DAOs/project research**: What are their policies for changing?
* 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.
<br>
* 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.
<br>
---
#### allocation & distribution
<br>
> A good distribution design is when no single person or group holds a large amount of the coin, instead, it’s distributed among many individuals.
* how are the initial tokens distributed? There are roughly 2 ways:
<br>
##### pre minted
1. The team distributes tokens to itself.
@ -100,31 +57,37 @@ Vesting means when they're allowed to sell the tokens. You want to make sure tha
* 100% fair. Everyone has equal access.
<br>
<br>
<img width="490" alt="Screen Shot 2022-05-31 at 4 10 16 PM" src="https://user-images.githubusercontent.com/1130416/171298450-9c18c98a-db92-41f7-baad-1e3a180fe924.png">
<br>
<br>
---
#### what drives the demand
### concerns
* 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.
<br>
---
### what drives the demand
* Utility (gas, fun, adoption)
* Value Accrual (xStaking, governance)
* The Memes and Narratives
<br>
---
### resources and tools
<br>
@ -137,6 +100,3 @@ Vesting means when they're allowed to sell the tokens. You want to make sure tha
* [The Reverse Liquidity Bootstrapping Pool](https://tokenomicsdao.substack.com/p/the-reverse-liquidity-bootstrapping)
<br>