#19 - Intro to Tokenomics

In this episode, Flo and Lovis go back to the basics. We work our way through a list of Tokenomics terms and try to explain all the relevant concepts from the ground up. We hope you enjoy this intro to Tokenomics. If you have questions remaining please reach out to us via discord!

Show notes:

What is Tokenomics & why is it relevant?

1. more than just supply and demand. Also mechanisms, incentives, utility

2. tokens capture value like shares, but can do more (shares vs. tokens)

Terminology

1. NFTs

2. Layer 1 / Layer 2

3. smart contract

4. Liquidity

5. staking

Principal - Agent

Simple protocols

1. Bitcoin

2. Ethereum

3. Uniswap

Tokenomics concepts

1. Protocol Owned Liquidity

2. voting-escrow

3. social tokens & DAOs

Key metrics in evaluating

1. Demand

   1. value of the project i.e. do customers want to use it?

      1. Uniswap has deep liquidity.

   2. utility of the token i.e. how can it be used (this is where tokens are different from shares) -

      1. token as voting,

      2. staking,

      3. api access

   3. mechanism i.e. how does the protocol use the token? -

      1. 3% off of tx fees are used to buy back the token and store it in the treasury.

      2. The token needs to be held at a rate of 1/3 based on the TVL,

      3. tokens are paid out to providers of the largest amount of liquidity

Supply

1. Quanitative

   1. How much will be supplied? (needs to meet the demand)

   2. How much is circulating? (how much is or can be traded on markets)

   3. Market cap & Full diluted market cap (what is the capitalisation and how would that look like if all tokens are released?)

   4. inflation (How many new tokens does the protocol create / year?)

   5. emissions (how many new tokens are unlocked / year?)

   6. burn (are tokens burned / taken out of circulation?)

2. distribution / allocation

   1. who received allocation (team, airdrop to community?)

   2. At what prices? (vc and investors often get in much lower that what public can buy)

   3. How will they unlock over time? (vesting schedule)

How we do this?

1. Evaluation Framework

2. Tokenomics Design Framework

3. Tokenomics 101 articles per protocol

4. Consulting to design tokenomics

Watch this episode on YouTube:

Disclaimer:

Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.

None of this is legal advice. This podcast is strictly educational. Talk to your lawyer.

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