Steemit Crypto Academy Contest / S6W3 - Tokenomics in the Crypto Ecosystem

Hello everybody.

Welcome to this post. I hope that all of you will be good and happy and enjoying your precious health with the grace and blessings of Almighty Allah. Today, I am going to take part in the SteemitCryptoAcademy week 3 and the topic of discussion is Tokenomics in the Crypto Ecosystem. So, stay tuned.

What's your understanding of Tokenomics in the crypto ecosystem? And highlight the main importance.

The word Tokenomics is actually the combination of two different words that are 'Token' and 'Economics'. Here, we are aware about the word Token as it is used for the cryptocurrency assets that are based on different Blockchain projects. While, the economics is a wide subject that is concerned with the management of the economy of a blockchain.

In simple words, we can say that the Tokenomics is actually the study of the economics of a blockchain. There is a very important role of the Tokenomics in the progress and success of a blockchain. It is actually a set of some factors that decide the value of a token in the market.

The Tokenomics also tell us about the value of a token and its use cases in the Blockchain world. It also describe about the effect of the increase or decrease in the price of that token. The use case of a token in its respective blockchain is actually the deciding factor behind the growth and success of that token. A of these things are collectively called as the Tokenomics.

The Tokenomics is very much important for the cryptocurrency trading as we all know that the investors must have to do the analysis before making any trade in the market due to its high risks. So, Tokenomics is actually what hr must have to consider first while entering the market.

By learning about the complete road map of the respective tokens, he could be able to make the decision whether that token is good for him to invest in it or not. After studying the Tokenomics, the traders can decide that if they are going to invest their money so that he could be able to get good returns in the future.

The Tokenomics is not only important for the success of a token but also it effect the working of a Blockchain greatly. The demand and supply of the token can be managed with the help of the Tokenomics so that the value of that token should be Increase instead of the decline in the growth of that project of the Blockchain.

The rewards of the active nodes, the mining of the tokens, the events that are happen for the Promotion of the token and the blockchain, the expenditures are taken into account to carry out a fair Tokenomics of a token and if all these things are carried out and managed properly the growth and success of that project and token is almost ensured.

So, these are most important roles of the Tokenomics in the growth of a token, a Blockchain and the benefits of the traders and stakeholders of that respective token.

What are the components of tokenomics? Explain each in detail.

Tokenomics is very much important before investing in a project or trading on a token. So, there are a few components of the Tokenomics that can be considered while doing activities in the market. These components are actually the things that can decide the worth of the particular token in the market.

Supply of a Token is one of the most important component of the Tokenomics that id kept in view by the developers of a project at the time of launching it. The supply of a token actually means that the availability of the token for the investors in the market in the liquid form. Supply can further can be discussed in two different types.

• Total Supply:

Total Supply is actually the maximum amount of the tokens that can be available for the users till the end of its further mining in the respective blockchain. The total supply of many tokens is decided at the time of the creation and launching of the project of that token. When the total supply is completed, the mining of that token is stopped and hence the supply in market is shorten and there are chances of the growth of its value.

• Circulating Supply:

The second factor of the supply is the circulating supply that is actually the total amount of the liquid tokens that are present in the market for trading, transactions or fees, etc at a particular timeframe. Circulating Supply is actually what that can decide the demand and supply mechanism. If the circulating supply of a token is low as compared to the demand of that tokens, the price improves well.

Another important component of the Tokenomics of a token is the mining and staking of that token in the crypto ecosystem. The mining of a token is actually means the creation of the new tokens to increase the circulating supply of that token in the market. The mining of a token is actually based on the consensus protocol that id used in the particular blockchain.

Consider the Proof of Work (PoW), in such blockchains, the new tokens are minted by the miners that are actually the transactions Validators in the Blockchain. They use the high computational power to solve the complex mathematical calculations in order to verify the transactions.

While on the other hand, in the Blockchain that are using the Proof of Stake (PoS) consensus protocol, the creation of new tokens is based on the verification of tha transactions and creation of the blocks by the nodes that are actually selected on the basis of the amount of staking that they hold in a particular blockchain. So, mining and staking of a tokens are also important in Tokenomics.

Another most important thing that can considered as the basic components of the Tokenomics is the Token Utility. The token utility actually refers to the use cases of that particular token in the Blockchain. The more important use cases of a tokens are there in the Blockchain, the impressive will be its effect on the growth of the tokens.

There are many tokens that can actually used for the purchasing of various services in a particular blockchain, so they have good worth as they arr continuously exchanged in the platforms. While there are many that can act as the governance tokens and are used for the governance voting and hence they can improve the worth of that token in the market.

Another important component that I think can be considered as one of the major component of the Tokenomics of a token is the burning of that token. Burning of a token actually refers to the sending of the tokens to the invalid or null address that are no in the ownership of any individual, those addresses arr actually the dead addresses and the assets that are sent to them are never regained again.

The burning of token is done to reduce the circulating supply of that token as they are sent to the dead address and destroyed completely and permanently. So, the demand is increased as compared to the supply and hence there are more chances of the tokens' price to grow well in the market.

Choose a token and discuss its tokenomics. From the information deduced about the tokenomics of the asset, do you consider the asset worthy of investing in? Why?

I have chosen the BNB (Binance Token) for this purpose. First have a look at the data of this token that is taken from the CoinMarketCap.

In the above screenshot, you can see that the BNB token is currently have a price of $289.45 that is much impressive for a token. The maximum supply of BNB is 200,000,000 BNB and the curculating supply at the time is 159,968,587 BNB that is actually the 80% of the maximum supply.

Now, talking about the utility of the BNB token. Actually, the BNB token is the native token of the Binance exchange that is one of the most popular and the most successful crypto exchange ever. The BNB token is enjoying the top ranks in the crypto market from the time of its launching in 2017.

The use cases of the BNB tokens are many in the Binance projects and now, the Binance NFTs are even more increasing its worth and utility there. The burning scheme of the BNB token is also super awesome that is another important factor behind the success of this great token of the crypto ecosystem.

Yes, off course, I will surely advice anyone to stake this great token for long term as the future of BNB token is going to very much impressive. There arr two main reasons regarding the Tokenomics of the BNB token.

One of the major reason is that the maximum supply of the BNB token is going to be complete in a few years and after that, there are no more tokens that will be newly produced. So, there would be a great demand of this token in the market due to its high utility and hence the price will surely improve very much.

Another important factor that can lead to the bright future of the BNB token is the burning scheme of the BNB token. The Binance exchange has managed well for its burning in the form of both Automatic Burning and the Quaternary Burning mechanisms that would surely be worthy in the future of the BNB token.

Give a few points on why you think tokenomics is important to investors or traders.

• We all know that the crypto market is very much risky. There is no way to predict the upcoming moves on the market. But there are some techniques that can be used to simply guess the next move of the price in general market and Tokenomics is also one of those techniques. Tokenomics comes into the fundamental analysis.

• The study of the Tokenomics of a token is very much important for all the traders and the investors in the crypto market. If there is no study of the Tokenomics by the investors then there are many chances of high losses due to the failure of the project in which they are investing without studying the fundamentals of that project abd token. So, the tokenomics found importance there.

• The Tokenomics can help the traders and investors to understand about the liquidity of a particular token in the market and it can ease the traders to understand the effeciency of their trades in the market. If the liquidity is high, the traders can carry out their transactions more quickly.

• The study of the Tokenomics is also helpful in determining the future of a token. Looking at the burning schemes that are being adopted by the project developers, the curculating supply and the maximum supply of the tokens, the traders can make good decisions in the market so that they can get better returns in the future.

If you are to be the creator of a token, what aspect of tokenomics would you consider most important to drive investors to the project? Give reasons.

If I were the developer of a token then the most important things that I will surely take into account are two, Utility of the Token and the Burning of the Token. These two things should be considered morr carefully while launching and managing a token in the crypto ecosystem.

• Why Utility?

The utility of a token is actually the use cases of the tokens in the Blockchain or the crypto space. So, if there are good use cases of a token, the price will be impressive. The tokens that are used as the governance tokens and the tokens that are used to carry out daily transactions and thirdly the tokens that are used as the gas fees are more successful in the crypto ecosystem so far.

• Why Burning?

Burning of a token is actually the destruction of thay token by sending it to the dead wallet. The burning of the tokens is very important for me because it can be done to reduce the amount of tokens from the market. With the decrease in the circulating supply of a token, the demand will raise and hence the price will be effected positively.

Conclusions

Tokenomics is actually the study of various factors that can be the deciding factors behind the value of a token in the market. Some major components of the Tokenomics are the supply of that token, burning of the token, token utility, token distribution and the mining or staking of that token in the respective blockchain.

The study of Tokenomics is very much important before investing your money in a tokens. The trades can understand different things about the tokens that are surely be helpful for making good decisions in the market by considering the assumed future of that token in the market.

I would like to invite my friends @minikay, @malikusman1, and @simonnwigwe to take part in this beautiful contest.