Tokenomics: The Key to a Successful Web 3.0 Crypto Project
Tokenomics is an important part of determining the value of Web 3.0 cryptocurrencies.. Examining its core features and applying these concepts to your projects is crucial in bringing value to your tokens. But what is tokenomics exactly and what goes on in this field of blockchain technology evolution?
Read on below to understand tokenomic, as well as how it can help in attracting investments for your projects.
What is tokenomics?
Techopedia defines tokenomics as “the study of the supply, demand, distribution, and valuation of cryptocurrencies.” This includes certain factors such as token issuance, utility, and more. By studying tokenomics, investors can determine if a Web 3.0 crypto project is worth investing in. Developers will also know where the project can be improved upon, so in its launch will attract more success and increase long-term value.
What are tokenomics factors to consider for Web 3.0 cryptocurrencies?
Much like real-life currency, tokens are assets that can either increase or decrease in value depending on various factors. Tokenomics concepts are applied in order to maintain the long-term value and strength of a cryptocurrency, whether they be the more popular ones or Web 3.0 altcoins created as alternatives.
Here are some factors that must be considered when evaluating the tokenomics of a crypto project.
Supply and demand structure
One of the most important things to look at when assessing the tokenomics of a cryptocurrency is how it works with the supply and demand structure. Some tokens such as Bitcoin have a limit to the total supply of coins to be minted, while others, such as the supply of ETH, is infinite. The supply of the tokens should be low compared to its demand, as a too-high supply for the demand can reduce its value over time.
A token’s utility or use case is also a factor that affects the tokenomics of a cryptocurrency. This means that certain cryptocurrencies perform specific functions in their blockchain systems. Different types of use cases include sending money internationally, online shopping, yield farming through smart contracts, and more. The more diverse a crypto’s use cases are, the higher the value.
The distribution of tokens vary with different Web 3.0 crypto projects. Such projects should have a distribution system that reduces the effect on the supply and price of the tokens. Vesting periods for developers and capitalists are often put in place to protect investors from pump and dump schemes, which are fraudulent acts that involve the boosting of stock through false and misleading recommendations.
Incentivising crypto is one of the top cryptocurrency trends for2023. To incentivise participation is to ensure your crypto project is a sustainable one for a long period of time. Types of incentive mechanisms include proof-of-stake and proof-of-work issuance systems. New tokens are granted to those who mine, stake, and validate transactions. By putting incentives on your cryptocurrency, you make it an attractive investment for potential investors.
As mentioned above, a reduced token supply in circulation is ultimately more beneficial for a crypto project. To maintain this, the practice of token burning is done. This refers to putting coins in an inaccessible wallet to put them out of circulation. Different cryptocurrencies engage in token burning through different methods, with some having a scheduled burning period, while others do not.
With crypto being the future of decentralised finance, these factors affecting the tokenomics of each cryptocurrency should always be taken into consideration when launching crypto projects. By familiarising and applying these concepts into your new Web 3.0 cryptocurrencies and altcoins, you can ensure a successful and sustainable launch.
At No Standing, our expertise in all things crypto, including tokenomics, can lead your project to success. Contact us now and get started on your crypto journey!