How are tokenomics designed?
First, you have to evaluate the viability of a token for your project. Next, you consider the target market and user base, this includes investors since they are part of the user base. Then you have to align this user base with the long-term sustainability of the protocol via incentive structures (aka tokens). It can be confusing since there are many variables and steps involved, however, the TDS considers all this and provides an easy-to-understand process to design tokenomics.
What is the utility of tokenomics design?
The goal is to create long-lasting, sustainable and engaging projects. Tokenomics form an important part of this since they’re the key to creating a balanced token economy. In web3, tokens represent ownership and have a traded value (i.e. price), thus they can act as an incentive for users and in turn, a cost for the protocol, meaning that there is a balance that has to be found. The overall goal is to align interests between users and the protocol and achieve a win-win situation. Tokenomics are at the core of this alignment.
The TDS guides you through this thought process and ensures that you align users with the interests of the protocol.
How do I design good tokenomics?
The key to designing good tokenomics is understanding your user base's motivation for interacting with your protocol and the specific task that they will be performing. The goal is to align users with the protocol, meaning a win-win situation. Once you have an understanding of their underlying motivation and what tasks they will be performing you can create incentive structures to encourage certain behaviors and deter others based on what is in the best interest of the protocol. This covers many aspects such as allocations for investors, vesting schedules, incentive structures and more.
The Tokenomics Design Space was meticulously developed by leveraging the experience of Tokenomics DAO in designing tokenomics, providing a a user-friendly approach to creating robust tokenomics solutions.
What are the most important things to consider when designing a cryptocurrency’s tokenomics?
The token should have solid utility within the protocol, it should map the value created by the protocol (appreciate as the protocol creates more value), it should have a balanced supply of tokens that matches the expected demand for the token, it should have a fair allocation distribution and proper incentives structures in place to align users & investors with the long-term sustainability of the protocol. The TDS looks at all of these aspects and more to help builders come up with a long-lasting protocol.