One of the most significant factors in every individual’s life is money. Money is used to fulfill the daily necessities and has a profound influence on every aspect of an individual’s life. Even though it is such a crucial component to every individual, it is regulated by central institutions and governments, meaning that government or central institutions have a considerable amount of say in one’s income and daily activities.
The introduction of cryptocurrency, blockchain systems, and Tokenomics has completely changed the entire landscape of financial systems. Tokenomics has become an alternative for associating monetary policy to blockchain networks.
Defining Tokenomics (crypto economics or token economics)
Tokenomics is a term referred to, the study of policies and economic foundations of the generation and distribution of goods and services that has been tokenized. It has given birth to a new form of economic transactions, in which there is no requirement of intermediary bodies like banks or government. Tokenomics is completely different from the traditional economic system, as they are completely decentralized and offer more secure transactions.
In Tokenomics, tokens refer to the units of value that are developed over the blockchain, also referred to as cryptocurrencies. The word ‘token’ is not a new term but has always been around a long time, from membership cards to movie tickets all are examples of tokens, representing value. This value may serve in different ways from access to service, ownership of goods, rights over an asset, etc. For any ecosystem, token fulfills different roles, representing all kinds of value.
Cryptocurrency Tokenomics: Factors Included
Allocation and Distribution
There are two methods through which crypto tokens are distributed, they are either pre-mined or are released through fair-launch.
In Fair launch, there is no early access or reservation to the tokens, before they are made public. Bitcoin and Dogecoin are the best examples of this. Whereas in pre-mining, a certain amount of crypto tokens are first distributed among project developers, early investors, and other team members before being made public.
In the case of cryptos, there are three types of supply, namely – total supply, max supply, and circulating supply.
Circulating supply refers to the total number of tokens released and is in circulation.
Total supply is the number of tokens in existence at the present movement, any tokens that are burnt is not included in this.
Max supply is the total number of tokens that can be ever generated.
Token can either be inflationary or deflationary. Inflationary tokens are those which don’t have a max supply and will be processed again and again, for example, fiat currency. Whereas deflationary is opposite to it, there is a maximum supply of the token, for example, Bitcoin has a supply of 21 million.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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