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

“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.

ROI: ROI in this case is not how much you think the token price will go up. It’s how much income or cash flow the token is able to generate for you simply by holding it.

How many will ever exist?

Game Theory: Game Theory asks you to consider what additional elements in the tokenomics design might help increase the demand for the token.

Memes: The other reason people might want a token is simply the belief that other people want the token, and will want it in the future. You can call it faith, conviction, or memes, but, whatever you call it, the machine that generates belief in the growth of future value is always going to be an important consideration.

How quickly are new ones being released?

On the supply side, a token will increase in value if fewer of those tokens exist—we call that deflation. A token will decrease in value if more of them exist—that’s inflation. When you’re evaluating the supply side you don’t have to worry about things like whether the token has any utility, or whether it will generate income for its holders. You’r... See more