The *Tokenomics* (or token economy) is an essential pillar of the fundamental analysis of a crypto project, as it determines the viability, utility, and sustainability of the token within its ecosystem. Here’s why reading it is crucial in a good Analysis and how it influences the evaluation of a project:
*1️⃣#Supply Management and Scarcity* .
- *Total Supply (max supply)* : A strict cap (like Bitcoin at 21M) creates scarcity, while an unlimited supply (e.g., some stablecoins) can dilute value.
- *Inflation/deflation* :
- *Burn* mechanisms (token destruction) or staking rewards modulate supply.
- Example: Ethereum with EIP-1559 (burned fees) introduced deflationary pressure.
👉 *Impact* : Poorly managed supply can lead to long-term depreciation (e.g., projects with massive emissions to reward early investors).
*2️⃣#Utility and Real Demand.*
- *Use case* : A token must solve a concrete problem (e.g., payment of network fees, governance, access to services).
- Example:
- *BNB* (Binance): Reduces trading fees and allows investments in Launchpad.
- *UNI* (Uniswap): Voting rights on protocol developments.
- *Organic demand* : If the token is only used for speculation (without real utility), the project is at risk of collapse (e.g., many meme tokens).
👉 *Impact* : Projects with clear utility attract sustainable adoption (e.g., Chainlink for oracles).
*3️⃣#Distribution and Concentration.*
- *Initial allocation* :
- A balanced distribution among team, investors, community, and reserves avoids centralization risks.
- Example: If the team holds 40%+ of the tokens, they can manipulate the market (dumping).
- *Vesting* : Lock-up periods (e.g., 3-5 years) for the team and investors limit massive sales.