Mastering Tokenomics: Building a Sustainable Blockchain Ecosystem
The design of a good tokenomics is crucial for the success of any blockchain project, where by tokenomics, I refer to the economic design behind a token, in how they are issued, distributed, and used within the project’s ecosystem. Good tokenomics should create a system that benefits both the project and its participants, thus respecting an important aspect of a philosophical nature in its creation – ‘to create an equitable and sustainable system that promotes active participation and project growth, where its value is backed by the project’s own growth, and not by speculation around it.‘ For this, it will need Equity (a fair distribution, where a small group of participants is not favored), Utility (endowing them with clear utility and intrinsic value within the project’s ecosystem), and Sustainability (the assurance that the design itself makes it sustainable in the long term, avoiding practices that could lead to hyperinflation or token concentration in a few hands).
Let’s approach this section in phases to better understand the challenges faced by design teams, highlight pain points, and emphasize the advantages of proper cohesion among them;
Initial Emission: Determines the total number of tokens to be created at the beginning of the project, including a pre-sale, a public sale, or a direct issuance without investors through an airdrop or pre-mining.
Distribution: Defines how the pie and its slices will be shaped, distributing each slice among different participants and stakeholders, always actively seeking the participation of everyone and avoiding token concentration.
Reserve: Establishes a token reserve to ensure the project’s development, expansion, protection, and continuous improvement margin.
Incentives: Provides a rewards system that motivates users to contribute to the project, be honest, and spread its message worldwide. Staking, governance, minting, or positioning can be additional incentives that enhance the bond between users/community and the project.
Token Burning: Considers the possibility of implementing a token burning mechanism to reduce the total supply and increase the value of the remaining tokens, although initially, I see it as a tool that is incorrectly used to increase value. It makes more sense when the token becomes deflationary, so I see it more as a tool to gradually pivot towards that deflationary state over time.
Governance: Gives token holders the ability and privilege to participate in the project’s decision-making through a system of proposals and voting.”
Benefits of a Well-Designed Tokenomics:
A well-designed tokenomics undoubtedly attracts investors more easily, encourages active community participation in the project, adds value to the token as its use is justified and locked out of the market. Above all, it ensures the long-term financial sustainability of the project.
Basic Tokenomics Proposal
Token Name: Basic Operation Token (BOT)
- Equity: Fair and consistent distribution of tokens based on the value contributed and the involvement of each team member, avoiding concentrating the highest percentage of distribution in VCs.
- Utility: BOT tokens provide access to tokenized financial services.
- Sustainability: Mechanisms are implemented to prevent hyperinflation and ensure price support through sustainable token supply.
- Initial Emission: 100.000.000 BOT tokens are issued at the project’s inception.
- 30% (30.000.000 BOT) is allocated to the public sale in an Initial Coin Offering (ICO).
- 20% (20.000.000 BOT) is assigned to the project team with a 4-year lock-up period.
- 10% (10.000.000 BOT) is reserved for advisors and external collaborators with a 2-year lock-up period.
- 20% (20.000.000 BOT) is allocated to community incentives and participation rewards.
- 10% (10.000.000 BOT) is assigned to a specialized development committee to finance project updates and improvements.
- 10% (10.000.000 BOT) is held as a strategic reserve for future needs.
Token Burning Mechanism: A token burning mechanism is implemented, where 1% of all transactions are burned, gradually reducing the total supply of BOT tokens.
In summary and to conclude the article, there is a wide variety of designs and use cases, depending on the specific characteristics of each project. What truly matters is not the tokens themselves but the rules with which they are constructed and designed, with special attention to the economic properties of the tokens. Generating economic benefits with blockchain technology is not about the ability to create new tokens but about the ability to create rules that are unbreakable and essential to ensure that everything flows in the right direction.