Value

<h4>Understanding tokenomics is a must for anyone interested in investing in cryptocurrencies. It explains the distinction between 100x % ROI and a -90% portfolio.</h4> 
Check out this guide to understanding tokenomics for a better crypto investment experience. 
<h5>The Basics of Tokenomics</h5> 
To find out more about <a href="https://www.techopedia.com/definition/tokenomics" target="_blank" rel="noopener">tokenomics</a>, you should consider specific indicators. Supposing you discover a potential token, these are the things to consider. They include: 
<ul> 
 <li>Circulating Supply</li> 
</ul> 
The quantity of tokens in the market that are accessible to the general public is the <a href="https://www.babypips.com/crypto/glossary/circulating-supply" target="_blank" rel="noopener">circulating supply</a>. So, if 40 million tokens are available to the public, that’s the circulating supply. 
<ul> 
 <li>Total Supply</li> 
</ul> 
The <a href="https://coinmarketcap.com/academy/glossary/total-supply">total supply</a> is the total number of tokens that will ever exist. Every token, including <a href="https://x.com/binance?s=21">Bitcoin</a>, has a total supply. 
<ul> 
 <li>Market Capitalization (MC)</li> 
</ul> 
The market capitalization is the total value of the circulating supply. So, to get the market cap, you’ll multiply the circulating supply by the current price, but it’s a lot easier now. You do not need to do heavy math; you can see it when analyzing a project. 
<ul> 
 <li>Fully Diluted Valuation (FDV)</li> 
</ul> 
The <a href="https://coinmarketcap.com/academy/article/fully-diluted-valuation-fdv-the-great-dilution-dilemma" target="_blank" rel="noopener">FDV</a> is the total value of the total supply multiplied by the current price of the token. So, by multiplying the total supply by the current price of the token, you get the FDV. Knowing these metrics lets you determine whether a project will do well. But the thing is, knowing these metrics is one of many things you need to do. There is more to it than understanding these metrics; you must dig deeper. Let’s get right into it. 
<h5>Supply Dynamics Inflationary vs. Deflationary Tokens</h5> 
Tokens usually follow two main supply paths: inflationary or deflationary. 
<img decoding="async" class="wp-image-144767 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/cxvffgdfgfght-271x300.jpg" alt="" width="435" height="482" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/cxvffgdfgfght-271x300.jpg 271w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/cxvffgdfgfght-380x420.jpg 380w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/cxvffgdfgfght.jpg 395w" sizes="(max-width: 435px) 100vw, 435px"> 
<h6 style="text-align: center;">Source: <a href="https://x.com/nobrainflip/status/1807356150456762584" target="_blank" rel="noopener">X</a></h6> 
<ul> 
 <li>Inflationary Tokens</li> 
</ul> 
These are tokens whose supply can increase over time, known as emissions. It leads to decreased value since far too many tokens are in circulation. So, if the emission rate is slow and the total supply cap is far from the current emission rate, the negative impact on the value is not much. 
<ul> 
 <li>Deflationary Tokens</li> 
</ul> 
Deflationary tokens have a reduced supply. They shrink with time through token elimination processes such as <a href="https://www.altcoinbuzz.io/?s=token+burning" target="_blank" rel="noopener">token burning</a>. Decreasing the supply will help to increase value as the number of total tokens is smaller, although it has only sometimes proven to work. Still, on tokenomics, let’s head over to the next aspect. 
<h5>Allocation &amp; Distribution</h5> 
The allocation and distribution of a token determines its launch and life. In that regard, there are two primary distribution methods: 
<ul> 
 <li>Pre-Mined</li> 
</ul> 
Here, early investors, team members, and advisors get the tokens. 
<h6>Fair launch</h6> 
Anyone can buy the tokens during their launch. There is no preferential treatment when issuing them. You can buy the tokens at the fair launch, irrespective of your investment strategy. 
If you understand how Pre-Mined allocation works, you can save yourself from being <a href="https://pintu.co.id/en/academy/post/what-is-exit-liquidity">exit liquidity</a> for early investors. 
<img decoding="async" class="wp-image-144768 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vxcdfgdgefwe-207x300.jpg" alt="" width="462" height="669" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vxcdfgdgefwe-207x300.jpg 207w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vxcdfgdgefwe-290x420.jpg 290w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vxcdfgdgefwe.jpg 397w" sizes="(max-width: 462px) 100vw, 462px"> 
<h6 style="text-align: center;">Source: <a href="https://x.com/nobrainflip/status/1807356157884846158" target="_blank" rel="noopener">X</a></h6> 
<h5>Why Allocation Matters</h5> 
If 50% of the tokens go to investors, who get 100% of their investments, they can dump them. All they have to do is sell off a large percentage, which will pull down the price of the coins. Key concepts to understand include: 
<ul> 
 <li style="font-weight: 400;" aria-level="1">TGE Allocation: The tokens available at the <a href="https://www.techopedia.com/definition/token-generation-event-tge" target="_blank" rel="noopener">Token Generation Event.</a></li> 
 <li style="font-weight: 400;" aria-level="1">Vesting: The gradual release of tokens over time.</li> 
 <li style="font-weight: 400;" aria-level="1">Cliff: The time between TGE and the next token vesting.</li> 
</ul> 
<h5>Common Distribution Recipients</h5> 
<ul> 
 <li style="font-weight: 400;" aria-level="1">Private Sale: Such people are investors, key opinion leaders, and the like.</li> 
 <li style="font-weight: 400;" aria-level="1">Public Sale: Retail investors.</li> 
 <li style="font-weight: 400;" aria-level="1">Marketing: Various amounts of money for use in promotions.</li> 
 <li style="font-weight: 400;" aria-level="1">Ecosystem: It involves staking rewards and other incentives related to ‘ecosystem development.’</li> 
 <li style="font-weight: 400;" aria-level="1">Airdrops: Free distribution of tokens to promote the project.</li> 
</ul> 
<img decoding="async" class="wp-image-144769 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdggfdfgftg-257x300.jpg" alt="" width="460" height="537" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdggfdfgftg-257x300.jpg 257w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdggfdfgftg-360x420.jpg 360w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdggfdfgftg.jpg 391w" sizes="(max-width: 460px) 100vw, 460px"> 
<h6 style="text-align: center;">Source: <a href="https://x.com/nobrainflip/status/1807356162360168801" target="_blank" rel="noopener">X</a></h6> 
<ul> 
 <li>Vesting Schedules</li> 
</ul> 
Projects release up to 20% of the token at <a href="https://www.techopedia.com/definition/token-generation-event-tge" target="_blank" rel="noopener">TGE</a> following several months of <a href="https://www.prioritycrypto.jobs//blog-article/vesting-and-cliffs" target="_blank" rel="noopener">cliff</a>. Afterward, you get 12+ months of vesting. Vesting schedules cater to long-term projects and reduce the chances of a token dump. 
<ul> 
 <li>Demand Dynamics</li> 
</ul> 
It also shows that you need more than supply to make a token successful. Demand is also essential. Here are four primary drivers of demand: 
<ul> 
 <li>Store of Value</li> 
</ul> 
Investors buy crypto assets with the expectation of their value increasing over time. That’s how people buy silver or gold, expecting it to do great numbers. People also see Bitcoin ($BTC) in this light because of its supply and global adoption. 
<ul> 
 <li>Community</li> 
</ul> 
A strong community can drive demand. Memecoins like Dogecoin got pumped because of their solid and enthusiastic communities. Community sentiment drives token demand. People go for tokens with active community participation. 
<ul> 
 <li>Utility</li> 
</ul> 
Tokens must offer some value proposition for people to continue to want them. For instance, tokens used in staking or voting have high demand since people need them to be a part of a network. 
<ul> 
 <li>Value Accrual</li> 
</ul> 
Tokens must also have utility through staking or even holding rewards. This value accrual encourages holding the token for the long term. It can also stabilize the token’s price level. 
<img decoding="async" class="wp-image-144770 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdgfghjgyuuk-251x300.jpg" alt="" width="473" height="566" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdgfghjgyuuk-251x300.jpg 251w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdgfghjgyuuk-352x420.jpg 352w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/xcvfdgfghjgyuuk.jpg 392w" sizes="(max-width: 473px) 100vw, 473px"> 
<h6 style="text-align: center;">Source: <a href="https://x.com/nobrainflip/status/1807356171218518477" target="_blank" rel="noopener">X</a></h6> 
<ul> 
 <li aria-level="1"> <h6>Staking</h6> </li> 
</ul> 
Staking is depositing your tokens for a particular duration to receive rewards. It benefits the network by lowering the risk for the staker and ensuring consistent demand for the token. 
<ul> 
 <li aria-level="1"> <h6>Holding Rewards</h6> </li> 
</ul> 
There is the locking up of tokens, which gives incentives to users. You can get airdrops from locking a token and help to maintain low selling pressure. 
<h5>Advanced Holding Incentives</h5> 
<ul> 
 <li>VeTokens (Vote Escrow Tokens)</li> 
</ul> 
Tokens also create extra VeTokens accounts that grant the holder voting power. The longer you have the token, the more voting power you garner. Holders can receive incentives to work for the network to increase its longevity. 
<ul> 
 <li>Farm Boosting</li> 
</ul> 
Staking tokens can elevate the proportion of farming operations’ revenue. It also motivates holders to get and maintain more tokens. 
<ul> 
 <li>Evaluating Token Holders</li> 
</ul> 
Knowing token holders of a specific token is quite essential. A solid community can support a token, while oversized possessions mean dumps. Also, interacting with the project’s community will help identify holders’ activity. 
<img decoding="async" class="wp-image-144771 aligncenter" src="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vcxfdghfyhjy-257x300.jpg" alt="" width="456" height="532" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vcxfdghfyhjy-257x300.jpg 257w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vcxfdghfyhjy-360x420.jpg 360w, https://www.altcoinbuzz.io/wp-content/uploads/2024/07/vcxfdghfyhjy.jpg 393w" sizes="(max-width: 456px) 100vw, 456px"> 
<h6 style="text-align: center;">Source: <a href="https://x.com/nobrainflip/status/1807356184006955278" target="_blank" rel="noopener">X</a></h6> 
<h5>Conclusion</h5> 
Tokenomics is the foundation of trading in any cryptocurrency investment plan. If one fails to study tokenomics, it is like taking on a game of chance. Exploring the supply and demand factors will assist you in your investment decisions. Even with the best tokens, there is no guarantee that some aspects will not impact the tokens. To reduce risks, adopt the latest information and perform thorough research. 
<a href="https://www.patreon.com/altcoinbuzz" target="_blank" rel="noopener"><img decoding="async" class="alignnone size-large wp-image-123701" src="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-1024x127.jpg" sizes="(max-width: 696px) 100vw, 696px" srcset="https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-1024x127.jpg 1024w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-300x37.jpg 300w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-768x95.jpg 768w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-696x86.jpg 696w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1-1068x132.jpg 1068w, https://www.altcoinbuzz.io/wp-content/uploads/2023/09/Alpha_website_leaderboard-banner-1.jpg 1197w" alt="" width="696" height="86"></a> 
<div class="youtube-embed" data-video_id="wmI-rql-2sA">
 <iframe title="These Altcoins - July Pump Loading!!" width="696" height="392" src="https://www.youtube.com/embed/wmI-rql-2sA?feature=oembed&amp;enablejsapi=1" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>
</div> 
<h6>Disclaimer</h6> 
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd. 
The post <a href="https://www.altcoinbuzz.io/bitcoin-and-crypto-guide/mastering-crypto-tokenomics-a-comprehensive-guide/">Mastering Crypto Tokenomics: A Comprehensive Guide</a> appeared first on <a href="https://www.altcoinbuzz.io">Altcoin Buzz</a>.

Mastering Crypto Tokenomics: A Comprehensive Guide

Altcoin Buzz

Other articles published on Jul 4, 2024

Best Airdrop Opportunities 2024

July 2024 Crypto Watchlist: Emerging Blockchain Coins Poised for Growth

Bybit Institutional Makes Dual Sponsorship for Swiss Summer Web3Fest and Crypto Valley Conference...

Next Cryptocurrency to Explode Thursday, July 4 — Worldcoin, Ethereum Name Service, Fasttoken, aelf

Bitcoin Examined: These Critical Points Are ‘Very Bad’ For BTC, Analyst Says

German Government Offloads $175M Worth of Bitcoin; BTC Price Struggles to Hold $56.5K

Join our free newsletter for daily crypto updates!