Hi, today lets learn something little on token and tokenomics.
Tokenomics (token economics) simply studies economic institutions and policies of the distribution production and distribution of goods and services that have been tokenized.
Some developments have encouraged economic transactions for example Blockchain technology, which has been a key driving force of motivation on the web. This development relies on token and do not require centralized intermediaries like banks or big enterprise. Decentralization is a characteristic of these commercial systems which differentiates it from the traditional industrial economies because it requires small capital to scale, and offers better security of transactions.
TOKENS
Token in a more simple term are units of value issued by an organization or enterprise. However in the context of tokenomics, it is specifically built on top of an existing blockchain.
In this day and age, tokens have been rebranded with the advent of blockchain, although token have been around for long. Examples of token tickets, gym membership cards, book club membership cards, driver’s license etc. Their value may be in the form of access to services, ownership, rights to asset etc, token can fulfill different roles in any given ecosystem.
TYPES OF TOKEN
Token can be classified under the following: Layer 1 vs Layer 2, Security vs Utility, Fungible and Non-fungible.
• Layer 1 (Protocol tokens) - they are the underline blockchain example Ethereum powdered by Ether.
• Layer 2 - They are built on top of an existing protocol token example is Basic Attention Token (BAT).
• Security vs Utility - They are tokens that pass the Howey test which classifies them as security. Utility tokens are issued to raise funds for a project and can be later used to purchase whatever the project offers.
• Fungible and Non-fungible – token that can be interchanged with other units are referred to as fungible tokens. Non-fungible tokens are tokens that are unique and cannot be interchanged.
Furthermore, token evolves with innovations hence token can also be classified based on perspectives, they include:
• Durability – tokens can remain stable in the face of censorship and attacks.
• Rights – tokens may give the holder property rights.
• Regulatory – token are easy to regulate (if required).
• Purpose – tokens represent existing assets or rights.
• Supply – tokens may be fixed or unlimited.
• Token-flow – tokens can be destroyed after use or remain in
circulation.
• Temporal – tokens may have expiry date (or may not).
To conclude, there is a lot to be explored in the world of tokenomics. Its growth will depend largely on government regulation of token economics and ease of production.
Thanks for reading.
