To define Tokenomics in simple words, I have to say that it is a concept of comprehending supply and demand in Cryptocurrency, which tries to convince or encourage the investors to hold or work around the Blockchain ecosystem.
Are you someone who is completely new to Online Trading or Crypto and how it works? Do you have trouble comprehending the terminology used in Online Trading? Do you also have questions like what Tokenomic is and how it benefits you or how do cryptocurrencies gain value?
Let us understand it in detail, and by the end of this article, I am sure you will better understand Tokenomics.
What is Tokenomics
When we merge the word ‘Token’ and ‘Economic,’ we get Tokenomics. Token means a voucher mainly used to trade or exchange something or service, for instance, gift, cards, etc. In Crypto, it represents a virtual token that would be profitable for both the original Blockchain (where you got the Token) and useful for the Token holder for future investments.
To grow on trading, Tokenomics will give you the inside knowledge and feedback based on the supply and demand of a product or service on Cryptocurrency.
How is a Token different from Coins
Just like Rupee, Dollar Coins represent virtual money. At the same time, Tokens are in the form of a price such as several rights, votes, services, and additional benefits. In short, a Token is not money but other things.
In simple words, the key to getting Crypto wealth is discovering new crypto coins before reaching the public market .Coins belong to Cryptocurrency. They have their Blockchain. At the same time, Tokens belong in that existing Blockchain like a branch of utility or service.
Features of Tokens
When Tokens work as an incentive for investors to buy, hold and work for a longer time for the ecosystem of the Token, it must have all the valuable features to attract the investors or users. Here I have mentioned some of the most important features.
In this process of crypto mining, as a Miner, you discover new data and block or verify any transaction. You can even build crypto mining rigs. After finding those new blocks, you will get a unique token as a reward when you fill it with data and add it to the Blockchain.
Here users have to complete a similar job or role, but at the same time, you can lock up coins to maintain the security of the Blockchain. As a result, you will get Yields as a reward.
It is to convince investors to buy a token through decentralized finance platforms.
These Tokens are stored in Liquidity Pools; later on, they would be useful in lending and exchanges.
Do not confuse yourself with almost the same spelling as I did. Unlike Mining, here, you create a token on the Blockchain with the help of a specific address and contact instead of discovering it. At Minting, Tokens are meant to meet the requirements like Name, Total supply, Symbols, etc.
No, you are not burning anything. It is the exact opposite of Minting. As the name suggests, it means to stop or burn something. Here, Burning does not mean burning your Tokens. Instead, it means to terminate the circulation of the Tokens. You can burn the Tokens through a reduction of the supply.
Types of Tokenomics
There are three main types of Tokens, and let us understand them with easy points.
Layer 1 and Layer 2
These Tokens are made on top of the existing blockchains, which are Layer 1. We can consider it as another utility of the original Blockchain.
Fungible and Non-Fungible
However, Non-Fungible is the opposite. It means those Tokens that can not be exchanged. Something that classifies as unique or rare. Your ID cards or club membership are non-fungible tokens.
Utility and Security
When a token does not pass through the “Howey Test,” it identifies as a Utility Token. This Token will give us the right to use our vote, the right to use the network, and increase the value of tokens based on demand and supply.
Security Token will be subject to federal securities and regulations, and our token value will be based on external and tradable assets.
Why Should You Care about it
I hope I have covered all of your doubts about Tokenomics. But the question is why it is so important and why You should be caring about Tokenomics.
- Well, for starters, Online trading and marketing will be in demand.
- As it is still an expanding field, it will be helpful to provide guidelines so users can be prepared for the future.
- If You want to build an economic project with blockchain technology, you must learn how Token works in the system.
- Tokenomics is a valuable concept when you want to invest or trade in Bitcoin or Cryptocurrency. And Bitcoin Smarter helps for the same. You can check out its official trading app and find out more!
- With the help of Tokenomic, you will be able to gain the user’s trust and convince them naturally to invest or hold the Tokens for a longer period.
- It is equally helpful for both producer and consumer.
- It works as an incentive system to improve the economy in Crypto.
So to conclude my remarks on the topic, Tokenomics helps to build that trust and ensure the investors buy Tokens. There are many types of Cryptocurrencies and Tokens, but in the end, they reach the same goal: to convince investors to buy and hold the Tokens for a long time. The features of Tokens will give them more chance and reason to stick around for a very long time.
I hope now you are clear with Tokenomics and its use of it. You are now all set to trade and invest.