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🍿 tokenomics for defi projects
tokenomics factors
- math
- supply vs. demand
- incentives
- value accrual
- human behavior & game theory
main questions
- 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?
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.
supply metrics
- 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.
allocation & distribution
- how are the initial tokens distributed? There are roughly 2 ways:
pre minted
- The team distributes tokens to itself.
- 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
- Utility (gas, fun, adoption)
- Value Accrual (xStaking, governance)
- The Memes and Narratives
on projects
resources and tools
- cadCAD
- Token engineering commons
- Awesome cryptoeconomics
- Utility token price simulator
- TokenSPICE
- The Reverse Liquidity Bootstrapping Pool