Tokenomics can be defined as the study of determining and evaluating the economic characteristics of a cryptographic token
Key aspects of token supply: Allocation, vesting period, and emission
We find that Layer 1s have seen Public Sales token allocations go down in favor of higher allocations towards Ecosystem Incentives in recent years
Centralized risks, participation rewards, and Foundation design are key questions every founder needs to answer
Data shows that vesting periods and cliff lengths have generally increased over the last couple of years. Traditional technology companies appear to be taking the opposite route
While most Layer 1s are inflationary, we note a few that employ burn mechanisms. Understanding the emission schedule of a token is crucial, illustrated by case studies on high FDV / low market capitalization tokens and high DeFi APRs
Companies are increasingly using interesting distribution methods to allocate airdrops. We highlight a few recent cases, including Hop Protocol and Optimism
Many protocols underestimate the demand side, paying too little attention to the incentive function of the token
Transparent and healthy governance can offer a lot of utility and drive token demand
Trust plays an essential role in the utility of tokens
Tokenization represents a form of digitalization of value. The utility comes from a token fulfilling one of multiple purposes
A two-token model helps to specialize the use cases for each token by separating the “ecosystem” from a purpose-solving token
In the long-run good projects with strong fundamentals and product-market fit will always win over those with bad fundamentals
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