Tokenomics: 4 Factors That Determine a Crypto’s Success

Early versions of token distributions have led to unsustainable dynamics wherein speculators are rewarded instead of those who are adding consistent value to networks through actual usage.

The term ‘tokenomics’ is a hybrid of token and economics, and its meaning is quite similar to economics. Tokenomics studies how people interact with tokens. Specifically, the issuance, distribution, and burning of tokens of a cryptocurrency. Economics is often divided into micro- and macro-economics. In this article I want to take more of a micro v... See more

In this third part, I’m going to cover utility. Utility is a subsection of the Demand side of the tokenomics equation. Even if a token has a great supply model, it still needs a good reason to exist and for people to hold it. Without those, there will be no demand for it, and no one will buy or hold it.

In a cryptonetwork, token holders would also be unwilling to supply capital at a loss indefinitely if the token’s only value is derived from its ability to generate profits in the future. However, this gets into the unique properties and value capture mechanisms of crypto – tokens may have value capture outside of their ability to produce income.