The new blockchain economy is being created online through the utility of both fungible tokens (cryptocurrencies) and non-fungible tokens (NFTs). A token is a digital unit of a cryptocurrency or NFT that are used as an asset or to represent a particular use on the blockchain. Tokens have many types of uses, but the most common are as a currency, art, security, utility or governance tokens. They allow for improved governance, decentralized compliance, encourage and incentivize usability, provide liquidity, and facilitate exchange with other benefits of use. Tokenomics is an economic ecosystem created by tokens that digitally represent assets of value that can be transferred to the physical world. The true value of tokenomics is the ability to move value from the real world to the virtual world and also to decentralize the control government, investment banks, corporations, big tech, and central banks have over people through the use of blockchain technology. The higher level of macro tokenomics is the big picture of creating alternative financial products using tokens on the blockchain to what is currently available with currencies and through Wall Street.
Micro tokenomics is the topic of understanding the supply and demand characteristics of a specific cryptocurrency. The study of the economics of specific crypto tokens, NFTs, or cryptocurrencies is called tokenomics. Tokenomics involves studying the fundamental factors that impact the supply and demand of tokens which will effect the price action and their long term durability as stores of value. Some of the factors include their quality, distribution process and the amount of production of future tokens along with the timing.
Here are the 12 metrics to measure a crypto token project’s tokenomics:
- Purpose: What is the goal of the token?
- Functionality: How well does it work?
- Utilization: Is it being adopted and widely used?
- Distribution: How are the tokens being distributed to users?
- Total token supply: Will there be a set limit of how many tokens can be produced or will the supply continue to increase?
- Distribution: How will the tokens be distributed from start to finish?
- Market cap: Where does the token rate on top cryptocurrencies?
- Listing: How many major crypto exchanges list the token for buying and selling?
- Liquidity: How hard is it to get in and out of the token? Is it easy to find a buyer?
- Price: Does the price reflect a good valuation? Sub penny prices can show a high supply and low demand.
- Blockchain: How popular is the blockchain that the token is on?
- Creator: How credible is the source of the token?
These 12 tokenomic questions can help establish both the value of a project and future potential when choosing one to trade or invest in.