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What is Tokenomics? The Investor's Guide



We receive a lot of questions about the project, and one of the most common areas of interest is PCL tokenomics. As a result, we wanted to dedicate a post to providing information about the tokenomics in general and how we believe our mid-term development plans will impact the circulating supply.

 

Tokenomics (token economics or crypto-economics) is the study of tokenized ecosystems and policies of the distribution, production, and distribution of goods and services that have been tokenized. 

 

This concept is not really new, but it does not stop being revolutionary, as the concept has now taken a new boom, feeding on old and new ideas. The economy of Tokens resurfaces in the midst of the revolution blockchain and a technology capable of tokenizing practically everything in the world. A fact that opens up new and unexplored possibilities for economic development.

 

In this article we will take you through some of the basic concepts of this new economic vision and how blockchain technology is vital for its development.

 

Tokenomics: ecosystem development

As we discussed at the beginning of this article, Tokenomics seeks the creation of an economic ecosystem supported by tokens. An ecosystem where everything is sustained by the different possible interactions with said tokens. In this way, the ecosystem is exclusively made up of tokens that represent real assets.

 

This asset can be anything. A work of art, a book, a blog post, a song, a scientific study, a real estate, a car and even financial assets that we are already used to. The true power of the token economy is that it allows us to transfer any type of value from the real world to the virtual world. But not only that, the token economy allows us to decentralize its control.

 

But the development of this new concept of economy goes through the construction of blockchain technology. And the reason for this is very simple: tokens may exist, but without the blockchain there is no token economy. This is because the blockchain is the means to achieve the necessary decentralization that the token economy demands.

 

But in addition to blockchain technology, What other elements are necessary for the tokenomics?. Well let's see some of them and the impact they have on said ecosystem.

Community

The first step in building a token economy is to have a community that supports the principles and goals of such development. This serves to build a critical mass that gives the token project the necessary public livelihood. This aspect will inevitably lead the token to have a growing and stable development.

In this way, the relationship between token development, products and functions associated with the community is direct and proportional. The more the community is listened to, included and taken into account, the greater the push and presence of the token.

Token distribution

Once you have a community interested in the token, it is necessary to promote its use among that community. This is only possible if we distribute the tokens between said community to make use of them. This has two very clear objectives: firstly, to stimulate the token economy and secondly, to enable the network that supports the token and make it grow.

There are different ways this can be achieved. The networks reward validators, or miners, with newly minted coins; others sell a portion of the token supply to prospective users in an initial coin offering (ICO) -Peculium Case-.

Provide price stability

One of the biggest challenges of the token economy is to achieve stability in their prices. Price fluctuation becomes a serious problem, when unscrupulous third parties can exploit them for profit. A process that makes the network unsustainable and no longer viable.

Given this, another important point for the viable creation of a token economy is to find a means to stabilize token prices. All this in order to encourage the use and adoption of the token in question and continue with its development.

Economic dynamics

Every ecosystem has an intrinsic dynamic which allows it to develop. This does not escape the development of the ecosystem of the token economy. The dynamics in this sense goes through two important points: the flow of tokens and monetary policy.

Both parties will drive the token to develop and promote specific behavior in both the user and development community. The objective of this is clear: to build a sustainable and stable ecosystem in the long term. It may sound easy to achieve, but the truth is that it is complex.

For example, you can develop a token with a very broad vision and usability. Its properties may be unique, but if its economic dynamics are not well planned, its failure is written in advance. In the end, the economic dynamics will dictate whether it manages to retain the user within the ecosystem. It is precisely this loyalty that is sought, since it will sustain the token in all its development and allow its evolution

 

Utility in the real world

Another important aspect of the token economy is the utility that said token has in reality. A project that adds value to the real world is a project worth developing and investing. Another important point in this regard, is to recognize if the token is fungible or not. This feature will dictate the actual usefulness of the token for a given project.

 

Importance of tokenomics

Tokenomics allows the creation of self-sufficient economic systems. In this sense, blockchain technology has allowed these systems to begin to develop in different use cases.

Each development with its own principles and ideas, but in general all under the concept of allowing economic microsystems to evolve within their own rules. This clear diversification will lead to many projects being carried out successfully and others not. But in general, those who achieve it will have a clear impact in the real world by allowing the tangible to be brought into the digital world, tokenizing it and allowing us to interact with it in a unique way.

Tokenomonics and investing: Why it is important when Investing in Crypto?

Supply and demand alone determine market prices. If we believe that to be true and that it applies to cryptoassets using blockchain technology as well as the stock market, then understanding the factors that will impact either supply or demand are of vital importance to both speculators and investors. 

In which case, there are a number of factors to consider. Perhaps the most important is to understand how the digital currency will be used. Is there a clear link between usage of the platform or service being built and the asset? If there is, there is a strong chance that a growing service will require purchases and usage that ultimately helps to increase the price. If there is not, what can the token be used for? 

Other important questions to answer include the following: 

  • How many coins or tokens currently exist? 
  • How many will exist in the future and when will they be created?
  • Who owns the coins? Are there some set aside to be released in the future to developers?
  • Is there any information to suggest that a large number of coins has been lost, burned, deleted or are somehow unusable?

Tokenomics is also helpful as guidance to understand how much an asset might be worth in the future.

 

Tokenomics is the study of the supply and demand characteristics of cryptocurrency.

 

While these questions may seem to require complex answers, they will provide an extra way to view cryptoassets and help to understand whether one asset is more likely to have a great future than another. Ideally, designing the tokenomics of the token should hinge on usage, usability, and value. In a bid to bolster a self-sustaining ecosystem, the Peculium team is allocating the appropriate precedence to this economic trifecta to ensure a healthy tokenomics system.


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