Thread by @VanessaDefi

A cheat code to having a successful research and investment in Defi is understanding its Tokenomics 📈

A Thread🧵🪡

In this thread, I’d be outlining
▫️ Terms in understanding Tokenomics
▫️ Key Variables to look out for when researching
▫️The ‘Where’, ‘Who’, ‘How’

Tokenomics simply put is the study of the Economics of a Token. We know “Economics” to be the study of the production, distribution, and consumption of goods and services- this Definition can be used in defining Tokenomics only that “the consumption....” here means the utility

▫️ Terms in Understanding Tokenomics
There are certain terms to look out for when reading through the Tokenomics of a project and they are: ▪️Inflationary Token economics
▪️Deflationary Token economics

▪️ A project’s Inflationary Token Economics refers to new tokens which are released overtime into its supply by virtue of staking, mining etc
What this mean is overtime, new tokens will be introduced into the token’s existing circulation (Supply increases)

Usually when this happens, demand for the token decreases, as a result of this, price significantly reduces

▪️ Deflationary Token economics is different.
The supply of cryptocurrencies deflates over time, meaning that supply is reduced but also as long as the demand of the token remains consistent, the price of the token will rise

An example is #FTM . Fantom has a total supply of 3.175 Bn of which 2.1Bn Ftm is in circulation. Subsequently the rest will be increased by 2023. Staking FTM would yield rewards from the supply reserved specifically for users who hold FTM.

Also, Recent catalysts indicates a significant pump in the price of #fantom
In Researching it is one thing to know about a token’s economics and know whether it is deflationary or inflationary, it’s another thing to identify Catalyst(s) that’d cause a significant pump in price

#Bnb is another example of a deflationary currency. The Binance cryptocurrency exchange burns or destroys – BNB each quarter to reduce its supply until the token’s supply hits 100 million BNB.
This picture shows the previous burns that has been done

Deflationary Token economics contributes to the Supply pressure of that token. Usually for Deflationary Token economics, Supply remains the same overtime and subsequently there would be more demand for that token as no new token is introduced to stake, swap etc

Especially when existing tokens in circulation are being burnt periodically, this reduces the total supply in which ~ Price increases 📈💰

▫️ Key Variables to look out for when researching Tokenomics
There are a number of variables and they are:
• Market Cap
• Circulating Supply
• 24hr trading Volume
• Trading Volume
• All time high (ATH)/ All time low (ATL)
• Total Supply
Etc

▫️ The “Where” “who” “how”
We have established Tokenomics being a uni word coined from Token- Economics. The Economics of a Token. Talmbout its Economics, Tokenomics aims to answer these questions:
• Where tokens are being Allocated?
• Where Tokens are being Distributed?

• Who owns how many?
• How are funds shared?
• Tokens release?

Let’s use $Aptos for example:
By looking at this, we can see exactly how and where the tokens are being distributed in %

In this, 19% is going to the Core contributors, 51% goes to the Community, 13.5% goes to the investors, 16.5% goes to the Foundation

When it becomes a seemingly red Flag 🚩 is when projects allocate really high % towards the team. The more tokens the team is getting the more likely it is to be a Cash-grab ‼️. This is why checking the % distribution is v important as it reduces your risk of getting rugged

A very important aspect also is when Tokens are gonna be unlocked
We saw the decline of $Avax due to the heavy unlocks it had. As at November 23rd 2021, Avax was at $134. Subsequently it had its unlocks as shown in the image and this led to more tokens in Supply

What happens when more tokens are released into supply with little demand? Price dumps 📉
It is important to note when projects are having their remaining supply unlocks
It gives you a sense of direction to navigating when to ape into that project or if to ape in at all

Although, it goes much deeper than simply "when" unlocks are occurring.
We also have to consider how they're occurring.
In essence, Understanding the Tokenomics of a project serves as a cheat code to successfully making profit$$ even in the bear times

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https://twitter.com/vanessadefi/status/1588172014954885122