Tokenomics is a combination of “token” and “economics” and encompasses the creation, distribution, supply and demand, and destruction of tokens in an ecosystem.

It’s important to apply proper tokenomics or token management for the following reasons:

Incentive — provides incentives to move the community towards its goals.

Distribution — disburses the tokens to miners and stakers who validate the transactions, and users who provide value to the community.

Stability — create a stable price for the token so the community remains focused on the project at hand rather than the price volatility of the token.

Yield — create a token of value that can generate income through interest rate arbitrage.

Dissolution — a path for removing tokens from the ecosystem to foster a stable price and prevent inflation.

Supply management — maintain an adequate number of tokens to grow the community and meet its objectives.

Vesting — required hold time of the token to prevent short-term speculation and create cohesion in the community.

Tokenomics fosters the economy of the community.

A good tokenomics structure leads to a healthy community through proper management of the token economics.   

 

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