Tokenomics or the token economy, is an interesting and new concept that is closely linked to the tokenization of things and blockchain technology, and with which it is intended to radically change the economic system around the world.

Unot of the revolutionary concepts introduced by tokens is that of tokenomics o token economy. This concept is based on the Convince users or investors of a project that the token derived from it can help build a sustainable economic ecosystem.

This new concept is not really anything new, but it does not stop being revolutionary, as the concept has now taken a new boom, feeding on old and new ideas. The economy of Tokens resurfaces in the midst of the revolution blockchain and a technology capable of tokenizing practically everything in the world. A fact that opens up new and unexplored possibilities for economic development.

In this article we will take you through some of the basic concepts of this new economic vision and how blockchain technology is vital for its development.

Tokenomics: ecosystem development

As we discussed at the beginning of this article, the token economy or tokenomics, seeks the creation of an economic ecosystem supported by tokens. An ecosystem where everything is sustained by the different possible interactions with said tokens. In this way, the ecosystem is exclusively made up of tokens that represent real assets.

This asset can be anything. A work of art, a book, a blog post, a song, a scientific study, a real estate, a car and even financial assets that we are already used to. The true power of the token economy is that it allows us to transfer any type of value from the real world to the virtual world. But not only that, the token economy allows us to decentralize its control.

But the development of this new concept of economy goes through the construction of blockchain technology. And the reason for this is very simple: tokens may exist, but without the blockchain there is no token economy. This is because the blockchain is the means to achieve the necessary decentralization that the token economy demands.

But in addition to blockchain technology, What other elements are necessary for the tokenomics?. Well let's see some of them and the impact they have on said ecosystem.

tokenomics are the token economy

Community

The first step in building a token economy is have a community that supports the principles and goals of such development. This serves to build a critical mass that gives the token project the necessary public livelihood. This aspect will inevitably lead the token to have a growing and stable development.

In this way, the relationship between token development, products and functions associated with the community is direct and proportional. The more the community is listened to, included and taken into account, the greater the push and presence of the token.

Example of this type of practice can be seen for example in The dao Ethereum, whose organized community maintains the operation of its entire structure. But the same goes for cryptocurrencies like Bitcoin, Litecoin, Dash and much more In the end, the community with its effort is the one who maintains the operation and evolution of the token and its associated technology.

Token distribution

Once you have a community interested in the token, it is necessary to promote its use among that community. This is only possible if we distribute the tokens between said community to make use of them. This has two very clear objectives: firstly, to stimulate the token economy and secondly, to enable the network that supports the token and make it grow.

To achieve this, various measures can be implemented. One of them and the most viewed of all is mining. This is a process that rewards those who provide computational power to form, protect and validate transactions within the token network. Another way is through initial coin offerings (ICO), airdrops or other means of token distribution. The objective behind this strategy is achieve the widest possible distribution of the tokens, decentralizing the power of the tokens.

tokenomics community

Provide price stability

One of the biggest challenges of the token economy is to achieve stability in their prices. Price fluctuation becomes a serious problem, when unscrupulous third parties can exploit them for profit. A process that makes the network unsustainable and no longer viable.
Given this, another important point for the viable creation of a token economy is to find a means to stabilize token prices. All this in order to encourage the use and adoption of the token in question and continue with its development.

Economic dynamics

Every ecosystem has an intrinsic dynamic which allows it to develop. This does not escape the development of the ecosystem of the token economy. The dynamics in this sense goes through two important points: the flow of tokens and monetary policy.

Both parties will drive the token to develop and promote specific behavior in both the user and development community. The objective of this is clear: to build a sustainable and stable ecosystem in the long term. It may sound easy to achieve, but the truth is that it is complex.

For example, you can develop a token with a very broad vision and usability. Its properties may be unique, but if its economic dynamics are not well planned, its failure is written in advance. In the end, the economic dynamics will dictate whether it manages to retain the user within the ecosystem. It is precisely this loyalty that is sought, since it will sustain the token in all its development and allow its evolution.

But at this point the digital shortage. And it is that the generation of the tokens cannot be infinite due to the risk that it will lose value

tokenomics governance

Governance

Another important aspect in the token economy in governance, that is, the existence of clear rules in the development and maintenance of the network. At this point, the governance rules can be diverse. In Bitcoin, for example, governance is decentralized, progress is made in the development of the network thanks to the intervention of the community that develops it. A process that is repeated for example in Ethereum.

However, other projects have more or less decentralized examples of governance.

Utility in the real world

Another important aspect of the token economy is the utility that said token has in reality. A project that adds value to the real world is a project worth developing and investing. Another important point in this regard, is to recognize if the token is fungible or not. This feature will dictate the actual usefulness of the token for a given project.

How much do you know, cryptonuta?

Is it possible that tokenomics exist without the existence of blockchain technology?

FALSE!

Blockchain technology is an essential part in the construction of tokenomics, since it is precisely this technology that allows us to tokenize any physical value we want and manage it in the most efficient and transparent way possible.

Importance of tokenomics

Tokenomics allows the creation of self-sufficient economic systems. In this sense, blockchain technology has allowed these systems to begin to develop in different use cases.

Each development with its own principles and ideas, but in general all under the concept of allowing economic microsystems to evolve within their own rules. This clear diversification will lead to many projects being carried out successfully and others not. But in general, those who achieve it will have a clear impact in the real world by allowing the tangible to be brought into the digital world, tokenizing it and allowing us to interact with it in a unique way.

This article is part of free course Tokenization, NFT and ICOs.

Access the course, acquire extensive knowledge in tokens and get your Certified Diploma by Bit2Me.