📈 How to analyze tokenomics and earn even more?

[starlightz]

"jamiiForum stop taking down my posts"


Tokenomics is the economics of tokens and their application in a project. By understanding tokenomics you can predict where the best entry and exit points will be.

There are 2 types of tokenomics: inflationary and deflationary:

✅ Deflationary - the number of tokens in the supply decreases over time. This usually happens by burning (destroying) a fraction of the tokens. Or by redeeming (buyback) tokens from the market and sending them to a non-existent address.

Example: BNB is a deflationary token with limited supply. A total of 200 million BNBs are issued. Once a quarter, a portion of the tokens are burned. This decreases the BNB issue and the value of one coin becomes higher.

🔼 Pros:

• Increase in token value. If demand goes up and supply goes down, the price goes up.
• Motivation to hold the token. Decreasing supply encourages holders to keep holding the token because the price will rise in the long run.
• Stable economy. No one will print an infinite number of tokens by depreciating them.

🔽 Minuses:

• Reduced turnover. The higher the deflation - the more people tend to accumulate rather than spend. This hurts the economy of the project.
• There is no incentive to develop. Destroyed tokens could be distributed among the most active part of the community and stimulate various activities in the project.

✅ Inflationary - the total number of tokens increases over time. New tokens are issued through mining (BTC), stacking (ETH), farming (OSMO), and other activities.

Example: Dogecoin has an inflationary model. New coins are infinitely printed.

🔼 Pros:

• Incentives for project activity. For example, you can earn OP tokens for project activity on Optimism.
• Rewards for early users.
• Liquidity poaching. Projects can offer a high % on staking through rewards in their tokens.

🔽 Minuses:

• Willingness to sell the token. High inflation can cause the token to be sold all the time.
• Impairment of the asset. Increased supply leads to a decrease in the value of a single coin.

✅ Conclusion

As you can see both models have their advantages and disadvantages. In the long run, deflationary tokens will have more value. In the short term, during a project's HYIP, inflationary tokens will have more value.

💭Ultimately, the success of the project will depend on a combination of factors: tokenomics, team, marketing and market conditions.

 

[DarrenLowe12]

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