It’s possible to get filthy rich by investing in cryptocurrency. But you could also lose all your money. How can both of those things be true? Well, like most investments, crypto assets come with a host of risks but also vast potential rewards. We recommend to educate yourself before you take any investment decision.
What is Tokenomics ?
Tokenomics consists of two words “Token” and “Economics.” Tokenomics is the quality of a token which will convince users/investors to adopt it and help build the ecosystem around the underlying project of that token. So, when we say “quality” what exactly do we mean? To put it simply, anything that impacts the token’s value is a part of tokenomics. Tokenomics is a pretty broad subject and includes a variety of components. Let’s go through them one-by-one.
It should go without saying that a credible project has a reliable team behind it. The people behind the project is critical in determining if the coin has any chance of gaining widespread adoption
Another important thing to look at is how the token is actually going to be distributed post crowdsale. You can check out these details in the project’s whitepaper. Also, it is important to check the lock-up period on the tokens given to the team and advisors. Founders/creators who are interested in the longterm potential of their projects will have a long lock-up period.
Public Relations & Branding
One of the most important aspects of a crypto project is its community. Without a good community, a project is nothing. It doesn’t matter how fundamentally sound your cryptocurrency is, it is crucial to give proper attention and respect to your potential buyers aka community. Projects with the most active communities tend to have more stable tokens.
Many crypto projects tend to look down on community building and focus their entire energy on building a product. While there is absolutely nothing wrong with being dedicated to building a great project, one shouldn’t ignore their communities in the process. Projects need to make sure that there is someone in their team who is regularly interacting with the users while displaying empathy.
One of the most critical factors to look into is the business model of the project. Projects should have a robust model with which they can make money. Crypto coins like Bitcoin and Bitcoin Cash are only used for payment purposes, hence they don’t need complicated business models. However, for decentralized applications, which aim to be more than simple payment systems, they need to have a robust business model.
Real World Utility
The next thing that you will need to look into to gain a proper perspective on the tokenomics of the project is its real-world utility. In other words, is the project bringing any real-world value into the market? Is the project’s platform entirely dependant on the token? If yes, then that is a project that is worth investing in.
The last thing that we need to look into is the structure of the token and how well it fits into the project. This is a pretty deep subject, and we are going to focus on it pretty exclusively in the following sections.