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Explore our glossary, your go-to resource for understanding various crypto-related terms and concepts. From blockchain jargon to cryptocurrency terminology, we've got you covered with clear explanations to help demystify the world of crypto.
SUPPLY
DESIGN
Modeling
Validation
ICO
verification
ALERTS
inflows
OUTflows
velocity
Economic charts
revenue stream
Markov Decision Process (MDP)
Agents base modeling (ABM)
Inflation rate
distribution
TESTING
Lock up mechanisms
buy back
RUIN TEST
unlock value
Grants management
token dormancy
liquidity distribution
burn
RATE
SYSTEM
INCENTIVE
NFT
PLAYERS
INVESTORS
RISK MANAGEMENT
OPTIMIZATION
FINANCE
DECENTRALIZED
LANDOWNERS
INVESTORS
REAL ESTATE
EDUCATION
ECONOMICS
INTELLIGENCE
REWARDS
PLATFORM
DATABASE
Tokens typology
One way to distinguish a crypto-currency from a token would be to say: tokens are mostly not implemented on their blockchain, unlike crypto-currencies. An interesting corollary follows directly from this distinction: the price of a token can be affected by many factors besides Supply and Demand, such as their linkage to other assets. This is not the case of crypto-currencies which are fully market-regulated.
Crypto-currencies such as bitcoin, are always of one type as their sole purpose is always to be a medium of exchange. On the other hand, there are several types of tokens because tokens can be designed for several purposes which themselves can be sub-categorized into different types. For example, when tokens have a representation purpose, they can represent a wide variety of elements: digital assets such as voting rights or digital identities (we speak of digital representation of these rights) or linked to virtual reality objects (virtual representation) or even legal rights granted by law or agreed between parties (legal representation). It is therefore necessary to make finer typological distinctions
There are several types of tokens in the blockchain ecosystem, each serving specific functions. Cryptocurrencies like Bitcoin or Ethereum primarily act as mediums of exchange and stores of value. Utility tokens provide access to services or products within a blockchain network. Security tokens represent financial assets such as stocks or bonds and are subject to regulatory compliance. Lastly, NFTs (Non-Fungible Tokens) are unique tokens used to represent ownership of digital or physical assets, like digital art or virtual real estate.
Understand a tokenomic in 7 key points
Tokenomics is the study and design of the economic system around a blockchain project’s token. It includes the token's creation, distribution, and utility within the ecosystem. Key aspects involve how tokens are initially allocated (to founders, investors, or the community), their supply limits, and mechanisms for issuing or burning tokens to manage inflation and scarcity. It also covers the token's uses, such as accessing services, paying for transactions, or participating in governance. Additionally, tokenomics outlines how incentives and rewards, like staking or mining, are structured to promote engagement and long-term value within the project.
The main principles of a tokenomy include defining the token's utility, such as its use for accessing services or participating in governance. It also involves the distribution strategy, outlining how tokens are initially allocated among stakeholders like founders, investors, and users. Supply dynamics are crucial, managing how tokens are issued or burned to control the supply and value. Additionally, incentives and rewards are structured to encourage participation and engagement, while governance principles allow token holders to have a say in the project's decisions and future direction.
Maximizing the utility of a token means designing it to have multiple valuable uses within its ecosystem. This can include allowing it to pay for services, access exclusive features, participate in voting or governance, and earn rewards. The more ways a token can be used effectively, the more valuable and attractive it becomes to users.
The usual tokenomic vocabulary
Token supply refers to the total number of tokens created for a cryptocurrency or blockchain project. It is typically divided into several categories. The total supply includes all tokens that exist, including those currently in circulation and those that are locked or reserved. The circulating supply is the portion of the total supply that is actively available and being traded in the market, excluding any tokens that are locked or reserved. The max supply is the upper limit of tokens that will ever be created, which helps control scarcity and can impact the token’s value. This division helps manage the token's availability, its economic impact, and its perceived value over time.
In a token allocation, various parties receive different portions of the total tokens based on their roles and contributions to the project. Typically, the founders and team are allocated tokens as compensation and incentive for their work in building and maintaining the project. Early investors receive tokens in return for their financial support during the early stages, often at a discounted rate. The community and users get tokens to encourage adoption and engagement, which may include rewards for participating in the network or contributing to its growth. Advisors and partners are allocated tokens as compensation for their expertise or strategic support. Additionally, tokens are often set aside in reserves and ecosystem funds to support future development, marketing, or other needs. Lastly, public sale participants acquire tokens through events like ICOs (Initial Coin Offerings) or IEOs (Initial Exchange Offerings), where they invest at a set price.
TGE, or Token Generation Event, is the process where a blockchain project creates and issues its tokens. During a TGE, the project generates the tokens and distributes them to investors, team members, or the community, often as part of an Initial Coin Offering (ICO) or similar fundraising event. This marks the official release of the tokens into the market.
The purpose of a presale is to offer tokens to early investors before they are available to the general public. This helps raise initial funding for the project and can generate early interest and support. Investors often receive tokens at a lower price during the presale, providing an incentive for early participation.
A public sale is when a project offers its tokens to the general public for purchase, typically after private and presale rounds. This allows anyone to buy the tokens at a set price, usually through events like an Initial Coin Offering (ICO) or Initial Exchange Offering (IEO). It's a way for the project to raise funds and increase the distribution and accessibility of its tokens.
The soft cap is the minimum amount of funds a project aims to raise to proceed with its plans. If this amount isn’t reached, the project may refund investors and reconsider its strategy. The hard cap is the maximum amount of funds the project will accept. Once the hard cap is reached, no additional funds are taken, and the fundraising period ends.
The purpose of an ICO (Initial Coin Offering) is to raise funds for a new cryptocurrency or blockchain project. During an ICO, the project sells its tokens to early investors, usually in exchange for established cryptocurrencies like Bitcoin or Ethereum. This allows the project to secure the capital needed for development and launch, while giving investors the opportunity to buy tokens at an early stage, often at a lower price.
The difference between Market Cap and Fully Diluted Valuation (FDV) lies in how they measure the value of a cryptocurrency or token. - Market Cap (Market Capitalization): This is calculated by multiplying the current price of a token by its circulating supply. It represents the total value of the tokens that are currently available and being traded in the market. - FDV (Fully Diluted Valuation): This is calculated by multiplying the current price of a token by its total possible supply, including all tokens that could exist in the future. FDV represents the total potential value of a cryptocurrency if all possible tokens were in circulation. In essence, Market Cap reflects the value based on existing tokens, while FDV shows what the value could be if all future tokens were issued.
Token inflation refers to the increase in the total supply of tokens over time within a cryptocurrency or blockchain project. This occurs when new tokens are created and added to the circulating supply. Token inflation can happen through mechanisms such as mining rewards, staking rewards, or scheduled token releases. While it can incentivize participation and support network security, excessive inflation can decrease the value of existing tokens if the supply grows faster than demand.
In the context of cryptocurrencies, deflation occurs when the supply of tokens decreases over time, or when the rate of new token issuance is lower than the demand for the tokens. This can happen through mechanisms such as token burning, where tokens are permanently removed from circulation, or by limiting the creation of new tokens. Deflation can increase the value of each remaining token, as fewer tokens are available to meet demand.