Specifics of tokenomics and the role played by them in Web 3.0
2020 is a year that saw the crypto investments taking leaps and bounds with increased adoption among users. The same trend continues to thrive even in 2022 with manifold crypto projects entering the DeFi space. With this trend in place, how do the investors know about the value of cryptos to decide on the crypto project to invest in? And for this, let’s get introduced to the term “Tokenomics.”
Unlacing The Concept Of Tokenomics
“Tokenomics” is the blend of the specifics “Token” and “Economics” that makes the particular crypto project interesting to the investors for them to invest. Tokenomics helps the users be informed about the crypto they want to buy. From the details of the token supply to the utility value, it holds all of it will be elaboratively discussed in the white paper. In short, tokenomics defines the economics of the token supply that directly impacts the success of the project by grabbing the attention of the investors.
Let us now look into the particulars of tokenomics put up in the white paper in the following section of the blog.
Caliber To Assess The Token Worth
Below are the aspects that make up the crypto tokenomics which are looked upon by the investors before vesting in the crypto project.
Token Allocation And Distribution: Tokens are distributed in one of the two ways – Pre-mined or public launch. Pre-mined, as in some amount of tokens are circulated through exclusive address before it goes live for the public. Whereas, the other one is where the tokens are launched to the public and do not give way to early access to the tokens. Example of this type is Bitcoin, Dogecoin, etc. And it is crucial to make a note of the source of token distribution to be assured of the legitimacy of the project.
Supply Of Tokens: Tokenomics gives the details of the token’s maximum supply. The decision regarding the total supply of tokens is coded in the protocol level by the developers to retain the value of the tokens. If the token supply exceeds the maximum permissible limit, they are burned to balance the supply with the demand.
Token Market Cap: This gives complete information about the funds invested in the particular crypto project along with the value of the maximum token supply in circulation. This is a good measure of finding the value of the crypto tokens.
Utility Value: Apart from the value holding, many tokens are developed with the utility value. It powers the token holder to have governance rights of that particular crypto ecosystem. For example, they can vote or give suggestions to change the number of tokens issued to stakers.
How Do Tokenomics Cause A Difference In The Web 3.0 Transformation?
Web 1.0 and Web 2.0 played their fair part by allowing users to consume content over the internet. And now the digital world is marching fast forward into Web 3.0 evolution driving the interest of the user to earn/execute by leveraging the strength of blockchain.
More specifically, the decentralized nature of blockchain facilitates the collaboration of stakeholders through DAO (decentralized autonomous organization) and also endows equitable ways for them to incentivize. For a clear-cut understanding of this, we need to know the role played by tokens.
Tokenomics as seen above serves as a monetizing protocol and incentivizing community benefitting both the developers and consumers to derive value from the blockchain – the major driver of Web 3.0.
Summarizing,
The digital economy is making rapid progress such that tokens will replace equity in companies. The main catch about this is that tokens instilled with governance and currency value include every participant in the project network rather than only the investors or the owners in the conventional method.
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