Tokenomics 101: The Basics of Evaluating Cryptocurrencies - DeFriday #19

Most crypto assets are highly correlated and move together, and if you’re holding anything besides the big foundational coins, it should be based on some belief that its tokenomics and incentives will result in it outperforming the base currencies it's built on.

Belief in future value is often one of the most powerful drivers of demand. Bitcoin has no cash flow, no staking rewards, nothing. It just has the belief that it could be a long term store of value to rival gold. Or more ambitious beliefs like definancialization and hyper-bitcoinization. But it’s all beliefs at the end of the day.

“Tokenomics” has become a popular term in the last few years to describe the math and incentives governing crypto assets. It includes everything about the mechanics of how the asset works, as well as the psychological or behavioral forces that could affect its value long term.

If you’re considering whether or not to buy a crypto asset, understanding the tokenomics is one of the most useful first steps you can take to make a good decision.