Tokenomics refers to the design of a cryptocurrency’s token and how it operates from an economic perspective. It encompasses the token’s distribution model, total supply, circulation rate, burn/mint functions, utility, and monetary policy. Analyzing a token’s tokenomics provides insight into its viability as an investment or technology.
Factors like supply issuance schedules and mechanisms to alter supply in response to demand help determine the token’s valuation over time. Tokenomics aims to create sustainable self-regulating systems where increased utility and adoption drives up demand and value.
Meanwhile, well-calibrated token supplies avoid dramatic value loss from inflation. Teams create tokenomics models to assign roles and behaviors to tokens that improve network security, governance, user incentives and funding. Strong tokenomics align the interests of various network stakeholders to grow an ecosystem and its native assets. Monitoring factors like velocity and distribution concentrations allows projects to dynamically calibrate tokenomics. The goal of well-constructed tokenomics is establishing long-term sustainability.