[Tutorial]: Tokenomics & Economic Models 101
-
Written for project builders and investors wanting to decode how token designs drive value and behavior—clear steps, no fluff
1️⃣ Define Your Supply & Emission
Start by choosing how many tokens will ever exist and how they’re released:
- Max Supply: the absolute cap (e.g. 1 billion tokens)
- Initial Supply: how many exist at launch (e.g. 200 million)
- Emission Schedule: timeline or formula for minting new tokens (linear, halving, declining inflation)
This controls scarcity… and can create long-term value as issuance slows!
2️⃣ Plan Distribution & Vesting
Who gets tokens and when they unlock shapes incentives:
- Team & Advisors: often 10–20 %, with a multi-year vesting cliff
- Investors & Partners: early backers might get discounted allocations, but vested over 1–2 years
- Community & Ecosystem: airdrops, grants, liquidity mining—fueling adoption
Use vesting schedules to prevent immediate sell-offs… and reward commitment!
3️⃣ Design Utility & Incentives
A token must do something real:
- Governance: voting rights on protocol changes
- Staking Rewards: lock tokens to secure the network or earn yield
- Fees & Discounts: reduced fees or access to premium features
- Burn Mechanisms: destroy a portion of tokens on transactions to reduce supply
Align token rewards with user behavior you want—growth, security, liquidity!
4️⃣ Choose Economic Metrics
Track your token’s health with key ratios:
- Market Cap: price × circulating supply—gauges overall size
- Fully Diluted Valuation (FDV): price × max supply—shows potential ceiling
- NVT Ratio: market cap / daily transaction volume—high values can signal overvaluation
- Token Velocity: how often tokens change hands—low velocity suggests HODLing
Monitor these regularly to spot shifts in demand or supply pressure!
5️⃣ Incorporate Dynamic Models
Modern projects often layer in advanced mechanics:
- Elastic Supply (Rebasing): balances expand/contract to target price (risky if poorly designed!)
- Dual-Token Systems: separate governance tokens from utility tokens, isolating voting power
- Bonding Curves: price rises automatically with each purchase, incentivizing early buyers
Test these in simulations or testnets—unexpected behaviors can emerge!
6️⃣ Manage Risks & Adjust
No design is perfect—build in governance and flexibility:
- Governance Overrides: community can tweak emission or fees if needed
- Emergency Pauses: ability to halt minting or transfers in crises
- Regular Audits: security reviews of smart contracts and economic logic
Plan for worst-case scenarios—your tokenomics should evolve, not be set in stone!
Your Next Steps- Pin this tutorial in Tokenomics & Economic Models
- Draft your token’s supply & distribution table in a simple spreadsheet
- Run basic scenarios: what if price doubles? what if token velocity spikes?
- Share your outline in the subforum for feedback and fine-tuning!
Follow these steps—and you’ll go from “abstract whitepaper” to “robust economic model” in no time!
-
C CryptoKas pinned this topic