Master's Guide to Tokenomics for 2024

Introduction

Circulating Supply: Amount of tokens currently in circulation
Total Supply: Total amount of tokens that will ever exist
Market Cap: Total dollar value of circulating tokens
Fully Diluted Value (FDV): Total value in dollars of all tokens including those locked up

Relationship between circulating and total supply impacts inflation
Inflation: Increase in token supply can decrease token value
Emissions: Rate at which tokens enter circulating supply
- Fast emissions can lead to problems
- Ideal emission pattern: steady increase over years

Staking Rewards, Airdrops, User Rewards, Token Unlocks: Major sources of supply increase
Common Allocations and Ideal Percentages
- Team: ≤ 15%
- Advisors: ≤ 10%
- Early Investors: ≤ 25% unless long vesting
- Public Sale (IDO, ICO): ≤ 10%
- Marketing: ≤ 10%
- Ecosystem (Staking, Airdrops, Rewards): ≥ 10%, ideal 20%
- Treasury: ≥ 15%
- Liquidity: Locked for ≥ 2 years, up to 20%
- Airdrops: Vary widely but can be significant
- Vesting: Controls token release to prevent dumping
  - TGE (Token Generation Event): Day token is released
  - Cliff Period: Time between TGE and next unlock
  - Emission Schedule: Frequency and percentage of token unlock post-cliff

Balance of supply and demand impacts token price
Types of Demand:
- Incentives for Holding/Staking: APY, airdrops
- Store of Value: Mostly Bitcoin but can apply to others
- Community: Strong community drives up demand, e.g., meme coins
- Utility: Token use cases, e.g., ETH for gas fees
Holders and Motives: Research is crucial; strong community ideal
Vesting Considerations: Critical for team, less crucial for early investors

Deflation: Decreasing token supply via burns or buybacks
Utility Expansion: More utility over time can increase value
Locking Mechanisms: Ensuring tokens are locked up for rewards
APY/Yield: Correct balance to avoid high inflation
Real Yield: Yield in non-project tokens like Bitcoin/Ethereum
- Important to check if yield comes from sustainable sources
Airdrops: Incentivizes holders without causing inflation

Tokenomics assessment on a case-by-case basis
**Signs of Good Tokenomics: **
- Finite, preferably deflationary supply
- Strong demand drivers
- Robust community and token utility
- Effective value accural mechanisms
Research: Most info in white papers, websites, or project community channels
Concluding advice: Mastering tokenomics is vital for crypto success