[Educational post] What is tokenomics and why is it important?
Educational post: What is tokenomics and why is it important?
Tokenomics is a term describing the economy of token. It describes the factors affecting the use and value of token, including, among other things, the creation and distribution of token, demand and supply, stimulation mechanisms and graphics of combustion of tokens. For crypto projects, well -thought -out tokenomics is crucial for success. The assessment of the project tokenomics before making a decision on participation is important for investors and interested parties.
Let’s look at Bitcoin as an example. The total number of bitcoins is pre -programmed for 21 million coins. Bitcoins are created and put into circulation by mining. Miners receive a certain number of bitcoins as a reward when the block is mined every 10 minutes or so. The reward, also called subsidies for the block, is reduced by half every 210,000 blocks. According to this schedule, halving occurs every four years.
Since January 3, 2009, when the first block or a genesis block was created on the Bitcoin network, the block subsidy was reduced twice from 50 BTC to 25 BTC, 12.5 BTC and 6.25 BTC currently. Based on these rules, it is easy to calculate that about 328 500 bitcoins will be obtained in 2022, dividing the total number of minutes per year into 10 (since the block is mined every 10 minutes), and then multiplying by 6.25 (since each block gives out of 6 25 BTC as a reward). Thus, the number of bitcoins mined every year can be predicted, and it is expected that the last bitcoin will be obtained around 2140. “Refers primarily to the structure of the economy of cryptocurrency conceived by its creators.
Here are some of the most important factors that should be taken into account when considering cryptocurrency tokenomics. The proposal of tokens demand and offer are the main factors affecting the price of any product or service. The same applies to the crypt. There are several important indicators that measure the number of tokens. The token utility refers to use options developed for token.
For example, the utility of BNB includes BNB power supply, paying for transactions and receiving discounts on trading commissions in the BNB chain, as well as the use of the community’s usefulness in the BNB ecosystem. Users can also make BNB rates on various products within the framework of the ecosystem to receive additional income. Analysis of the distribution of tokens in addition to demand and supply, it is important to see how tokens are distributed. Large institutions and individual investors behave differently. Knowing what types of organizations own token will give you an idea of how they can trade their tokens, which, in turn, will affect the cost of token.
Tokenomics is a fundamental concept that you need to understand if you want to do cryptography. This is a term covering the main factors affecting the cost of token. It is important to note that no factor gives a magic key. Your assessment should be based on as many factors as possible and analyzed as a whole. Tokenomics can be combined with other tools of fundamental analysis to make a reasonable judgment on the future prospects of the project and the price of its token.