Due to the revolution that the blockchain technology is bringing to our way of lives these days, there has been a rise in the numbers of crypto related projects. NFTs, DAOs, Dapps and Metaverse are great examples of these projects. And after going through a lot of whitepapers,I believe that there is a need for a guide for entrepreneurs who want to create tokenomics for their project. This article would help you understand what tokens are and how to create an effective tokenomics plan for your project.
First of all, let’s define tokens.
A token is a unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products, while facilitating the distribution and sharing of rewards and benefits to all of its stakeholders. So basically, tokens represent utilities or assets of a project.
Types of Tokens
- Equity Token
- Security Token
- Utility Token
- Reputation/Reward Tokens
Mostly, for your projects, you would be making use of utility tokens. Utility tokens are used to participate in a service or product in a project.
To design a very good tokenomics for your project, there are some points you need to take into consideration. Here are they:
- The need for a blockchain
This helps to evaluate how well decentralized your project is. You need to understand problem the blockchain technology would be solving in your project and if your project could exist without it.
2. Who are the users of the token?
You need to understand the set of people that would be owning the tokens. It could be the users, investors, founders, team members, miners, developers etc.
3. The Exact Use of the token
You have to understand how the token would be used, the benefit for using it and the valuable transactional activity it offers.
4. How would the tokens be distributed?
The percentage of the token distributed should be accurately laid out. You might consider providing a percentage for the public offering, Investors, Team members and for aidrops. The choice is yours.
5. The supply of tokens.
You can choose to either use the supply with a maximum number of tokens or without a max supply. Would some of the tokens be released later? It depends on your model. It is important to note that tokens with a max supply have a greater chance of acquiring high cost in the future.
6. Hold time of the tokens
This describes the average time that a token spends with a user before it is exchanged for cash. The hold time should be long to avoid the value of the token collapsing. This time can be prolonged by building more utilities.
7. Price of Token
The price for your tokens can either start high or low depending on your choice of supply of tokens.
If you are just working on your project or you are through with it, it would be very great to check your project against these points as it would help create a great Token-to-Market Fit for your project. Cheers on producing a strong and effective tokenomics for your project.