Thread by @Quant_Econ

1/ #Tokenomics designs have a long history–some good, some bad.

So how do you distinguish between good and bad tokenomics designs without having much economic knowledge?

Simple answer: the narrative.

A thread: 🧵👇

2/ A good tokenomics design is consistent with the narrative of the #token. The goals and values promoted by a project should be reflected in the way they design and manage the token’s supply and demand. 🪙

3/ The best way to explain this is to go through some examples. Let's get started. 🚀

4/ Good token design: Ethereum $ETH

#Ethereum has withstood the tests of time thanks to its great token design from the very beginning and consistency with the overall narrative. 📚

5/ ETH defines itself as a “community-run technology powering the cryptocurrency ether and thousands of decentralized applications”.

The tokenomics of $ETH is consistent with this narrative because: 👇

6/ The community actually does run the technology. The Ethereum network is powered by a decentralized group of community-members who are rewarded for their block-validating efforts. 💸

The original tokenomics has ensured sustainable rewards for these community members.

7/ Furthermore, over 83% of the original token supply was reserved for the community. Such a large percentages has helped to ensure decentralization of the token into the future. 🥧

8/ Bad Token Design: #Safemoon $SFM

Safemoon's original token narrative was quite obscure. It was not clear what the token's purpose was and what value it would bring to the real world.

9/ Their tokenomics was even less clear. Their tokenomics page doesn't talk about the token distribution, utility, vesting schedules, or other imperative metrics for the tokens mechanics.

Instead, they provided simply a fee structure for the tokens.

safemoon.education/safemoon-token…

10/ As we now know, the Safemoon token failed. 😢

11/ This serves as a cautionary tale. Safemoon's narrative was not aligned with their tokenomics, which should have served as a clear red flag for investors.

For a synopsis of what happened with Safemoon, we recommend this article:

vice.com/en/article/wxd…

12/ We understand that deciphering a projects tokenomics is challenging. If you're interested in a project, a starting point could be to first identify their brand/token narrative and then assess if it is consistent with the overall tokenomics design. 🪩

13/ If you're planning to launch a token for your project and want to ensure your tokenomics is consistent with your narrative, feel free to contact us.

We provide free first consultations! 😉

quantecon.io