Tokenomics

📝 Definition:

Tokenomics is the set of rules governing a cryptocurrency token. It tells you how the token is used, how many there are, and the various ways you can earn or use them.

Before investing in a token, it’s very important to understand its tokenomics.

Always DYOR (Do Your Own Research).

🔑 Key Features:

• Supply and How It’s Used: Explains how many tokens are out there and what happens to them over time.
• What You Can Do With Tokens: Details whether you can use them to buy things, vote on decisions, or earn more.
• Rewards: Outlines ways the project may reward you with more tokens for using them or holding onto them.

⚙️ How It Works:

• Making Tokens: Tokens start with rules about their total number, creation rate, and usage options.
• Sharing Tokens: Tokens are distributed, sold, earned, and sometimes destroyed (we say “burned” in crypto) by doing certain activities.
• Using Tokens: People can use tokens to pay for things, vote on project decisions, or influence the project.

💡 Applications:

• Raising Money: New projects often sell tokens to investors to raise funds to get started.
• Saving and Spending in Apps: Use tokens in apps to perform activities like borrowing money or investing.
• Voting: Holding tokens might give you a say in important project decisions.

🔍 Example:

Think of tokenomics like the rules for a school cafeteria’s lunch tokens.

You get tokens by buying them or earning them.

Then, you use those tokens to buy your lunch or snacks.

The more tokens you save, the more lunches you can buy later.

Holding the tokens might also give you the right to vote on what meals will be served in the future.

In crypto, tokens work in a similar way but can be used for different things depending on their rules.