Tokenomics

Tokenomics is the study and analysis of the economic aspects of a cryptocurrency or blockchain project, with a particular focus on the design and distribution of its native digital tokens. The term is a portmanteau of words token and economics. Key areas of interest include determining the value properties of the tokens themselves, and how the properties of tokens (together with other cryptographically secured rules and associated system actions) affect broader economic characteristics of the system including: How they provide and distribute scarce resources How that system interacts with other external economic processes How economic agents behave The economic efficiency of all these processes The field often has a strong applied focus, concerning itself with how to use its insights and principles to engineer economic systems to possess specific, desired properties. Both cryptocurrency and tokens are the subclasses of digital assets that use the technology of cryptography. Cryptocurrency is the native currency of a blockchain, while tokens are created as part of a platform that is built on an existing blockchain. Tokens can be created as native elements of a blockchain protocol, or by using a smart contract that is deployed on a blockchain which will host the new token. For example, Ether (ETH) is the native crypto asset of the Ethereum blockchain, and was created by the core Ethereum developer team to incentivise proper maintenance of the blockchain. While Axie Infinity Shards (AXS) tokens, were created using an Ethereum smart contract developed by an unaffiliated third party, in order to give token holders certain governance rights over the game Axie Infinity. In both cases, different tokenomic attributes are chosen to support the token's intended role. With particular attention typically being paid to tokens' ability to function as an incentive mechanism, and choosing monetary policy that brings token supply into...