TOKENOMICS How to Analyze Crypto Projects Blum Academy #blum #crypto #airdrop #bitcoin
TOKENOMICS How to Analyze Crypto Projects Blum Academy #blum #crypto #airdrop #bitcoin
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00:00Hey there crypto enthusiasts, ever wonder why some tokens are worth a fortune while
00:03others fizzle out? Or how these digital assets can fuel entire ecosystems? Well, it's all
00:08about tokenomics. Today, we're diving into the economics of tokens and what makes them
00:13tick. Let's give the floor to Vladimir Smirkis, who'll break it down in simple terms.
00:20Hello, everyone. This is Vladimir Smirkis. And today we will talk about a word or definition
00:27for all crypto projects. I'm sure you've heard it. Tokenomics, tokenomics, tokenomics.
00:33The tokenomics of specific project determines whether we will invest in it or not. So what
00:39does tokenomics really mean? Let's figure it out together. So tokenomics is the economy
00:46of tokens. Well, most crypto projects, blockchain projects have tokens. Tokenomics is the way
00:52these tokens interact with each other and the rules they follow. How much tokens will
00:57be allocated to investors, how much will be allocated to the audience, how many tokens
01:02will be burned, and how they will interact within the project. First and foremost, tokenomics
01:08should define the purpose of the tokens, or as it is now commonly referred to, the utility
01:12of these tokens, meaning the way they will be used. For example, for some blockchains,
01:18tokens are used as means of payment for fees within transactions, within the network, or
01:23a so-called gas. This is the most utilitarian and straightforward way. For example, in many
01:29cases you need exchange tokens to participate in launchpads and launch pools, which involve
01:34the distribution of tokens. You can stake or collateralize your tokens, and depending
01:39on their amount and the size of the staking, you will receive tokens of new projects that
01:43are listed on exchanges. Therefore, we should determine the purpose of the tokens as the
01:47first step. Secondly, tokens can motivate users to perform certain specific actions
01:54within the project. Also, tokens often serve as means of payment within a project. Specifically,
02:01Bitcoin is simply a peer-to-peer, electronic cash system, a payment system based on decentralized
02:07information storage, decentralized verification of transactions, and so on. Therefore, its
02:13utility is very clear. In some blockchain games, tokens are used as a payment method
02:19for participating in these games. Then the big question is, why do you need tokens and
02:24blockchain coins if you can pay with dollars, euros, rubles, or any other currency? Undoubtedly,
02:32the project itself needs tokens to have a so-called treasury, from which they will pay
02:36for marketing expenses, team salaries, and so on. Investors need tokens so that they
02:43can invest real money or use DET at the early days of the project and then receive their
02:48profit by selling their share of tokens. How is tokenomics formed? Well, of course, here,
02:55as in any economic model, the initial market supply of tokens is being formed. Sometimes
03:00all the tokens are released to the market at once, and sometimes tokens can be additionally
03:04minted. Also, tokens are often used to perform so-called governance or management. Token
03:11holders can vote using their votes or tokens for a particular decision. For example, to
03:17implement some technological improvement to the product or to repaint the project's
03:21application green. Of course, I'm joking now. But nevertheless, voting on various decisions
03:28is very often based on using tokens. This is called a DAO, a Decentralized Autonomous
03:34Organization, or DAO governance, the management of the project's life by those who hold
03:39a larger number of tokens rather than a smaller number. Tokens exist on the blockchain, so
03:45they are completely transparent, and we can see what percentage of tokens is held by a
03:49major holder or a group of major holders, how many are held by regular users, how often
03:55they move, and the number of performed transactions. All of this can be checked with the help of
04:00so-called blockchain explorers or scanners, for example. In TUN, there is TUNSCAN, there
04:07is ETHERSCAN for Ethereum, there is BNBSCAN for coins created on the BNBCHAIN blockchain,
04:14and so on and so forth. Therefore, the transparency of tokens undoubtedly exists when we talk
04:21about public blockchains and public tokens created on these blockchains. What should
04:26you pay attention to when you want to analyze the tokenomics? First, you need to consider
04:31the distribution of tokens. If the project founders hold the lion's share of the tokens
04:37while the other participants have very few, this should raise some significant questions
04:41for you. Will the price be determined fairly and transparently? If the owners decide to
04:47dump all their tokens on the market, it will, accordingly, crash the price. Therefore, the
04:52distribution should be more honest or more fair. The second point is the utility of tokens,
04:58how the tokens will be used within the project and what they are needed for. Therefore, the
05:03token economy should be tied to utility, something the token is needed for. The key thing you
05:08need to pay attention to within the project and comprehend for yourself is whether the
05:13demand will increase over time, whether the demand will grow as the product develops,
05:20or if it is a one-time event that could end up with unfortunate consequences for you.
05:25And thirdly, the economic incentives for project participants, how they will actually engage
05:30in the life of the project. Will it be voting? Will the tokens be used within the project?
05:35For example, for staking, where you can stake a certain amount of tokens, earn rewards for
05:39that, and so on, and so on, and so on. And fourth, it is important to understand the way
05:45tokens life is expected to continue after the release of tokens within the project.
05:50Well, typically what happens is that team members write a white paper based on their
05:55main idea, often create an MVP or initial product that demonstrates its viability,
06:00then the token listing occurs. Meaning that tokens start becoming liquid on centralized
06:05or decentralized exchanges, even on large tier 1 centralized exchanges. It provides
06:11more guarantees for buyers, consumers, and token holders, so they believe that the project
06:17will continue to thrive. And of course, at this point we come to understanding
06:22that the token has some future. But it is important to know the founders' aspirations
06:27for the future and how they plan to develop their project in detail. If once again, this
06:34is a one-time thing that they did once and then stopped, it's probably not very good.
06:39In blockchains, everything is very clear. Blockchains are created based on the requests
06:44of developers and community that exist, for example, to make blockchain cheaper. Faster,
06:50more transparent, more interactive. In the case of TON, we also have Telegram, for example.
06:56On top of everything, it has access to an audience of nearly a billion users, 950 million
07:01active monthly users. This was noted by Pavel Durov in one of his recent posts. In other
07:07words, all these things together should give you an understanding of the prospects of the
07:11token you are considering for investment or trading.
07:15So what is needed to create tokenomics? First of all, determine the essence of the project,
07:20the utility of the project, and distribute the tokenomics in such a way that there is
07:24no pressure on the price. If you give all investors the chance to sell all their tokens
07:28at the time of listing, it won't likely be very well received by retail, by mass users.
07:34Thanks Vladimir for that clear and insightful explanation. So now you've got the basics
07:39of tokenomics down. It's not just about the digital coins themselves, but the entire economy
07:44that surrounds them. Whether you're investing, trading, or just curious, understanding tokenomics
07:48gives you the power to see the bigger picture in the crypto world.
07:54That's all for today. Hit the like button, share your thoughts in the comments, and don't
07:57forget to subscribe for more crypto content.