What Is Tokenomics?
When it comes to cryptocurrency, you may hear the word “tokenomics” thrown around frivolously, but what exactly is tokenomics? Broadly, tokenomics is the study of cryptocurrencies’ supply and demand characteristics. If that sentence is enough to give you a headache, you are not alone. So simply put, tokenomics is looking at different cryptocurrencies and wondering why the price is changing all of the time. There are a ton of factors that contribute to this but we will make sure to cover the most important ones.
The aspects which go into formulating tokenomics are a coin’s or token’s creation, management, and sometimes removal from a network. Firstly, a cryptocurrency must be tradable (have the ability to be bought and sold) for people to have any interest in using it. Once someone is interested in a coin or token, they have multiple ways of acquiring one, depending on the cryptocurrency they want. Certain crypto currencies are minable, minted out of the blockchain by powerful computers that solve algorithms, or they can be bought directly as an initial coin offering when a cryptocurrency first launches.
The next factor of cryptocurrency feeding into tokenomics is the management behind the coin or token. The decisions and policies of the team behind a cryptocurrency help give a coin or token legitimacy. For instance, we vow to be transparent and community-centric with our crypto project, all while contributing to various charities, monthly. A factor that coincides with management is the decision to remove coins or tokens from the market. This is done to keep the value of the coin or token stable, as we do ourselves by charging an 8% transaction fee and burning 3%.
What is Blockchain?
Blockchain is a specific type of electronic database. What makes it different from traditional databases is that it stores data in blocks, and then those blocks are chained together. Makes sense, right? Except, blockchain takes it a few steps further than that. All sorts of information can be stored on a blockchain, but its main use at the moment is a viable ledger for transactions. When it comes to trading cryptocurrency, blockchains are decentralized, meaning that no one individual or group can have control of it, instead, every user has equal control collectively. But most importantly, all transactions made on a blockchain are permanently recorded and viewable by anyone, making it impossible to fabricate transactions and assets.
Coin Vs. Token
Coin? Tokens? What’s up with all of the different names? Aren’t they just the same thing? Sort of, but not quite. In cryptocurrency, when referring to a coin, it is a form of cryptocurrency that is native to its own blockchain. However, a token is a cryptocurrency that has been built on top of another blockchain. A prime example of this is how Binance Coin is on its own blockchain, and Official Token is built upon the Binance blockchain. Along with these differences in foundation, coins and token typically have different uses. Coins are mostly used as money, but sometimes are also used to fuel applications and token transactions. Tokens however can have an unlimited amount of uses, all up to the developers behind the crypto project.