Understanding the Basics of Tokenomics

New investors in the crypto world may be overwhelmed by their choices of over 19,000 cryptocurrencies to invest in. However, there are a few essential things to understand about how cryptocurrencies are designed that can help you determine which tokens will be successful in the long run or most beneficial to you in the short term. Understanding the basics of tokenomics is a critical aspect of successful crypto investing. Here are a few essentials regarding using tokenomics for successful investing.

What is Tokenomics?

Tokenomics has to do with the way new crypto tokens are designed, with built-in rules, incentives, and other benefits for its users. Each new crypto token is designed in a specific and unique way to try and encourage users to use that token over others actively. You can learn about the goals and reasons behind the design and establishment of new tokens by looking at its whitepaper. Understanding tokenomics can help you more easily navigate the cryptocurrencies available to you and determine which token will offer you the best benefits and incentives for your financial goals. Here are a few key characteristics that could be included in creating a new token to benefit coin holders.

Burn

The value of a token at any given time is determined by various factors, many of which we cannot predict. However, one factor when determining the price of a token at any given time will be the number of that token already in circulation. The market cap of a token is determined by a combination of how many coins are being used and how many have yet to be minted.  To ‘burn’ tokens is to destroy a certain number of coins to regulate the crypto price. Tokens with built-in burn mechanisms can protect their users from inflation. These deflationary mechanisms can incentivize investors to stick with the cryptocurrency long-term without the fear of inflation running down the value.

Airdrops

Another benefit that some tokens may offer is airdrops. Airdrops are random gift tokens to coin holders to incentivize users to invest and hold that particular token. Airdrops can help stimulate participation in specific cryptocurrencies, offering you the opportunity to make free money by simply holding the token. Airdrops are becoming more and more popular as an incentive in token design.

Community

If you’re unsure about the benefits and rules of specific tokens, joining an online crypto community can help you better understand the benefits of these tokens. Many cryptocurrencies and blockchain projects have large digital communities that support and critique those projects and can offer insights to new investors. Digital communities like FTX have platforms where you can keep up with the latest SHIB price through their exchange, make NFT investments, and learn more about crypto and blockchain through their broad knowledge base. Joining a crypto community could also help you unlock additional token features. For example, the new FTT token by FTX will allow coin holders to participate in that token’s governance. Coin holders can participate in open forums and discussions with the leaders behind the token to share their ideas and opinions.

These are just a few aspects of tokenomics to look out for. New regulations, mechanisms, and incentives are always being designed and integrated into new cryptocurrencies. Stay up to date on the latest token development by joining an online community and following new blockchain projects. The more you understand tokenomics, the better your investment can be.