Tokenomics are essential for wealth creation

In my opinion it’s a simple formula

Any given project can create X value and decides to capture Y% of X.

So there’s two sides to the coin👇

Value created

  • This is the product. The product is the only thing that can just create value out of thin air.
  • In the digital asset space, tokenomics is the only way a project can capture value. In my opinion, founders need to spend a lot of time thinking about tokenomics

Bad Tokenomics

Any project that is B2B focused with a payment token is an absolute joke. People that live on hopium, think these businesses want nothing more than to put a highly volatile, illiquid alt coin on their balance sheet. However, ‘when the chickens eventually come home to roost’ these projects are going to be left behind. No corporation, business or institution wants that kind of volatility on their balance sheet. It’s hard enough to get businesses to buy bitcoin, let alone an alt coin that moves 20% a day. This ruins business’s ability to budget properly and ‘carve out’ a set of predictable expenses.

Great tokenomics

A project’s tokenomics should be structured so the end consumer never has to interact with volatile cryptos. Customers do not appreciate having to add risk to their balance sheet just to use your product. In order to acquire customers you must make their life easier, not harder. As I mentioned earlier, businesses will never expose their balance sheet to assets that can drop 90% over night. The best tokenomics are ones that make the consumer feel like they are interacting with a traditional business. It’s a great sign If a project can create a mechanism that accrues value to the token without customers even knowing they have one.

Vesting Schedules

There is a lot of unwarranted anxiety around the difference between project’s ‘Circulating Token Supply’ and ‘Fully Diluted Token Supply’. In my opinion, it’s a good thing for a large percentage of tokens to be vested.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store