Tokenomics is a crucial component of a successful blockchain project which has a token in it. And our team often hears that there are some misunderstandings with this term. That is why we decided to launch a series of articles related to tokenomics and its basic components. So let’s find out together what it is and why it is important to build in the right way.

Tokenomics Meaning

First, let’s start with the definition. You can find a variety of sources that claim that the term “tokenomics” is the combination of the words “token” and “economics”. Unfortunately, the truth lies much deeper than it looks at first glance. 

Being a key factor in crypto project analysis and its success, tokenomics covers a wide range of factors that affect the value of the cryptocurrency. It refers first of all to the supply factors, especially to the model of a token, its business logic, and basic characteristics.

How Does It Work?

While designing tokenomics, you should first understand the purpose and logic of implementing a token. Why is it here, and does it bring value to the project and its participants? After this, you decide the type of tokenomics model. Then you need to consider the factors like total supply, token usage, token distribution (allocations), etc. After all, you will specify the action and actors, taps and drains, and token flow. This base moment will determine the future direction of the token inside your projects.

You must remember that tokenomics rules are fixed in smart contracts and are transparent, predictable, and difficult to change. That is why it is so important to establish them properly in the early stages. Biom Software team is experienced and has the main expertise in this field – so can consult you properly and provide you with a high-quality service. 

3 Key Components for Success

Tokenomics doesn’t end up on the supply part. The success of your project will depend on the other factor – the demand. This part includes 3 main components – ROI, memes, and game theory.

1. ROI

The return on investment (ROI) will decide how fast and how much token holders will receive their income from committing to your project. It may depend on the business model of your token and the usability of it. For example, you can implement well-known staking to encourage users to hold your token. Or you may include a burning mechanism that constantly will be decreasing the total supply and increases demand intensity. ROI decides the internal value of the token and justifies your decision to hold or not to hold it. 

2. Memes

Memes are closely connected to people around your project. Every ecosystem has a community that is driven by different psychological motivations. However, building such a community and well incentivizing it is not easy work. You need to have good marketing and management inside your media channels to keep them “hot” enough. Also, people tend to believe. And this factor can motivate them to hold their crypto assets, hoping they will skyrocket one day.

3. Game Theory

The hardest component is game theory. Usually, it is a combination of ROI and memes. The complicity comes with the fact that you can’t actually control it directly. Or can you? It might depend on many factors that you took as a basis for your demand part. And still, you can’t avoid the harsh market behavior, which can either make your project well-known or forgotten. 

Conclusion

Taking into account everything above, we can see that tokenomics is a pretty complicated thing that can directly influence your project’s success. But designing it with a team of professionals will protect you from unpredicted issues and losses. So contact Biom Software, and let’s deal with it!