Token economics refers to the economy built around tokens. This is the basic element of any blockchain project. It is essential for the team to realize token economy in a way that creates value for token holders and builds a sustainable economy. The creation of NFT token economics is a complex process, which depends on many factors. These include supply and demand balance, release strategy, token distribution strategy, use case, incentive mechanism and inflation prevention measures. The following will explain these factors one by one.

It's all about the balance of supply and demand

Token economics is most effective when supply and demand are balanced. This is the reason to promote the desire and sales of NFT. According to the principle of scarcity, if fewer assets are used and the demand is greater, the value of assets will rise. This is why the NFT project team should perform activities to ensure scarce supply while increasing the demand for tokens.

In terms of supply, the team will first consider the total number of tokens to be issued, whether new NFT will be generated over time, and what kind of deflation mechanism will help prevent inflation.

Examples and ideas of NFT token economics restricting supply

Most NFT projects provide a fixed supply. Consider PFP NFTs, such as Meebits. These projects release thousands at a time. Meebits released 20000 NFTs the next day. Even though different teams may launch more NFT series, the supply of Genesis series will not change.

The same is true of the meta universe. During the project implementation, different parts of the meta universe can be provided as the digital part of real estate in multiple sales activities. However, the total number of parcels to be issued is unchanged. For example, there will be 166464 terrestrial non forest vegetation in the Sandbox Metauniverse.

On the other hand, the Play2ear NFT project has different supply mechanisms. These programs allow players to win NFT assets in the game and increase the total token supply over time. To reduce NFT supply, these projects use deflationary methods such as reproduction, combustion, or fusion. The burning mechanism makes tokens permanently out of circulation. NFT games involve reproduction and fusion, creating new objects by combining two other non functional foods.

Token distribution

The success of the project is also affected by how the team distributes and distributes NFT tokens. Some projects immediately provide tokens to the public, while others choose fair press conferences. Some teams also published detailed NFT allocation plans. This is a necessary component of a replaceable encryption token, but not for NFTs.

For example, the NFT launch project allocates the total supply of NFT of £ 20000000 as follows: market mining (45%), core contributors (16%), air drops (6%), reserve funds (2.5%), community concessions (1.5%), DEX liquidity (1.5%), marketing activities (12%) and teams (15.5%).

Ideas and examples of NFT token economics increasing demand

Since the research of psychologist B.F. Skinner in the 1970s, people have generally believed that token economics must create value to stimulate positive behavior. The NFT team creates demand by attaching member benefits or other perks to the NFT.

On the one hand, these activities encourage NFT owners to hold tokens for a long time. As a result, the circular supply is reduced. To this end, the team can provide NFT locking opportunities for holders to lock their assets in the liquidity pool within a specific time frame.

On the other hand, these methods help maintain and promote the long-term demand for tokens. To achieve this goal, the team can provide generous member benefits, such as participating in IRL activities and future airdrops, gifts and airdrops. As space becomes more and more complex, the team continues to invent new NFT utilities.

ending

Token economics is a specific study of the definition of choice under scarce conditions. The goal of token analysis is to understand the potential value of the DeFi project by considering all aspects of token creation and management, including the supply, distribution and distribution of tokens. Because the law of supply and demand is immutable, token economics has a significant impact on the value of every cryptocurrency, "NFT" and "DAO", as well as all other types of token projects.