Tokenomics
The economic model and design of a cryptocurrency token, encompassing its supply schedule, distribution plan, utility within the ecosystem, value accrual mechanisms, inflation/deflation dynamics, and incentive structures. Well-designed tokenomics align incentives between all stakeholders and sustain long-term value. Poorly designed tokenomics can lead to unsustainable inflation or wealth concentration.
“Bitcoin's tokenomics includes a fixed supply of 21 million coins, halving events every ~4 years reducing issuance, proof-of-work distribution, and no pre-mine — all designed to create predictable, disinflationary monetary policy.”
Token Supply
The quantitative metrics describing a token's availability: Circulating Supply is the number of tokens currently available in the market; Total Supply is all tokens that have been created minus any that have been burned; Max Supply is the absolute maximum number of tokens that can ever exist (if capped). These metrics directly impact market capitalization calculations and price analysis.
Token Distribution
The plan for how a project's total token supply is allocated among various stakeholders — including the team, investors, community, ecosystem grants, treasury, and public sale. Token distribution is a critical element of tokenomics because it determines initial ownership concentration, vesting schedules, and potential sell pressure over time.
Token Burn
The permanent removal of tokens from circulation by sending them to an inaccessible wallet address (a 'burn address'). Token burns reduce total supply, which can create deflationary pressure on the token's price if demand remains constant. Burns can be one-time events, part of regular protocol operations (like Ethereum's EIP-1559 base fee burn), or buyback-and-burn programs.
Vesting
A schedule that gradually releases tokens to their recipients over a defined period, preventing large holders from immediately selling their entire allocation. Vesting typically applies to team members, advisors, and early investors. A common structure includes a 'cliff' (an initial lockup period where no tokens are released) followed by linear or periodic unlocking. Vesting reduces short-term sell pressure and aligns long-term incentives.