Introduction
When you deep dive into crypto coin research, the crucial part is understanding tokenomics, as it influences the value, utility, and longevity of a cryptocurrency. Tokenomics combines two terms: token and economics. In other words, the study of how cryptocurrencies are managed and structured to create a stable economic system.
The Basics of Tokenomics
Tokenomics is divided into three important parts, which are:
Token Supply: This consists of circulating supply, total supply, and unlocking tokens. Circulation supplies are coins that are circulating in the market and are in public hands. Total supply is the total amount of coins created—coins that have been burned (if any). It is comparable to outstanding shares in the stock market. Unlocking tokens means the tokens were distributed by schedule; in general, it was about 10% every specific time frame. This supply structure prevents all of the sudden inflation, which gives confidence to long-term investors.
Utility: In simple terms, it's purposes that tokens can be used for, like staking, which is the most common, or accessing various services. For example, paying in a Gucci shop using this coin.
Distribution: The tokens must be fairly distributed among investors, the team, and others. Many crypto scams use manipulations, giving a high percentage of tokens to the team, which makes the coin more centralized. And the price of this token in the market can be artificially changed, which is inappropriate.
Key Components of a Token Economy
Inflation and Deflation: Cryptocurrencies can be inflationary or deflationary. This aspect helps many crypto investors predict the price of tokens in the long term.
Govenance: Some tokens, like ApeCoin, provide holders with voting rights to influence decisions within the ecosystem. This democratic approach can drive community engagement and trust. But in most of these cases, this approach is inefficient because the community that makes decisions is made up of a bunch of amateurs in the crypto world without an understanding of tokenomics.
Token Rewards: Mechanisms to attract new participants, like staking rewards or airdrops. I personally never stake a new, unsecure, or unfamiliar token. Speaking of airdrops, in most cases, you need to trade to take part in them or do something else that involves your money. To be honest, these efforts and your money are not worth the reward you will get.
How do new coins utilize tokenomics?
New cryptocurrencies leverage tokenomics to create a robust and attractive ecosystem. Key strategies include:
Staking programs: They offer staking opportunities with an attractive annual percentage yield to motivate investors to hold in the long term. But before you'll participate in it, make sure the project is secure.
Liquidity Pools: New coins provide liquidity on exchanges to make sure there is enough volume for trading; this strategy helps stabilize prices.
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