2:16 Coins vs. Tokens
4:55 Supply And Market Cap
6:48 Allocation and Distribution
10:17 Vesting and Inflation
14:08 Staking and Utility
Coins vs. Tokens
Tokenomics is short for token economics. Tokenomics include a whole series of metrics relating to a cryptocurrency coin or token such as supply, allocation, distribution, emission, and utility.
Although they are often used interchangeably, cryptocurrency coins and cryptocurrency tokens are actually two very different things.
Coins are more like currencies and are native to their own blockchains A blockchain is a digital ledger of transactions that works from a decentralized network.Learn more. By contrast, tokens do not have their own native blockchains, are similar to stocks, and often have specific use cases.
Supply And Market Cap
Some cryptocurrencies like DOGE have a massive supply, which is why Dogecoin is one of the biggest cryptocurrencies by market cap even though the dollar value of each coin is low.
Other cryptocurrencies like yearn.finance’s YFI token have a small supply, and it is why 1 YFI is worth more than 1 BTC even though it has one fourth of the market cap of DogecoinDogecoin7$ 0.0832260.00%-0.28%3.08%details.
This is why you should always pay attention to a cryptocurrency’s market cap rather than the actual dollar value of the coin or token, and think in percentage terms rather than dollar terms.
Allocation and Distribution
Cryptocurrencies are created in two ways: by fair launch, or by pre-mine. A fair launch is when a small community of people start collectively mining a coin or token.
BitcoinBitcoin1$ 51,190.920.18%-6.01%-15.89%details, LitecoinLitecoin13$ 68.170.13%0.39%1.59%details and Dogecoin are examples of fair launched cryptocurrencies. There are no coin or token allocations for fair launched cryptocurrencies.
Allocation is relevant to any cryptocurrencies that were pre-mined. A pre-mine is when the team behind the project mint some or all of the coins or tokens before opening up the network to the public.
Once you have a sense of how a cryptocurrency’s coins or tokens were allocated, you can use blockchain explorers to see how the coins or tokens are currently distributed.
Vesting and Inflation
Vesting applies to pre-mined cryptocurrencies and refers to how the coins or tokens are expected to be allocated over the coming months or years.
Unlocking too many tokens at once or within a short timeframe can sink the price action of that token in the short term.
When it comes to inflation, a cryptocurrency is either inflationary or deflationary. If a cryptocurrency has too much inflation, it can reduce the value of the coins or tokens already in circulation over time.
Unless the inflation schedule is extremely aggressive, it will have little to no effect on the short-term price potential of a cryptocurrency.
Staking and Utility
When you stake a cryptocurrency as a validator or a delegator, those coins or tokens are usually locked up for some period of time. This can supercharge positive price action during a parabolic run.
‘Utility’ is also referred to as a use case and includes basically anything that drives demand for a cryptocurrency coin or token. More utility generally = more demand, which means price goes up.
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.
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