Tokenomics Design: Some Questions You Need To Ask Before
@jojonas_xyz
There are many questions you need to ask before you design tokenomics for you projects. You can find plenty of guides about this topic but most of them are focusing on "analyzing", not "designing". If you want to inspect tokenomics from the perspective of a designer, here are some questions you may need to ask yourself.
I devided them into four clusters, you can read them below.
General
How many tokens will the project use? Why? Can it be increased or decreased?
What's the function of each token? Is there any need to avoid function-overlapping? Is there any of the value flow unidirectional, and why? Where will the value export to and how to carry it? Can it be carried naturally?
Is there any user behaviors that will affect the value flow of tokens? Are these behaviors triggered self-motivated or stimulated? Is the trigger condition stable?
What's the proportion, distribution of token fundraising and how much? Is the valuation reasonable with logical valuation model? How much does the team's finances rely on these tokens?
What is the project's revenue source? Will there be fluctuations (such as zero royalty discussion previously for NFT marketplaces)? Is there any countermeasures estimate in case that black swan occurs?
Which chain is selected for the project? Which chain is selected for assets? If different, how to estimate cross chain security?
When does the token generate, and when to provide liquidity? Before or after the project release? And how long?
Is there any need to airdrop? What role should airdrop play(marketing, community building, user retention)? What is the rule? Can the goal of airdrop really be achieved? Or was it just attracting hunters?
What's the competitive barrier of the project? What's the advantage and disadvantage comparing with your rivals? How to magnify the advantage with the token design?
How to make a significant growth in early stages? How to retain after gaining growth? If we use Ponzi model, how we mitigate the harmful things companied with?
LP management from official, folk, or protocol? How deep is your pool? Where are your LP rewards come form?
Has a perfect data monitoring system been established?
Token Supply
What's the total and current supply of tokens? How will the token supply curve change according to the token release plan?
What's the total allocation, the initial circulation and distribution of tokens (referred to TGE)?
How much is the initial circulating market value? What's the FDV？ What's the initial pool size?
IDO or IEO? How many tokens should you hold initially? Plans of market making?
The distribution proportion of tokens in circulation in different stages (according to the token distribution and release plan)? How do you define these assigned holders?
What's the ideal distribution range of top10 and top100 addresses?
What kinds of relationships between token distributors are? How you assumpt their behaviors expected respondings to each other?
Is the estimated inflation rate of tokens acceptable and reasonable? Is there anything can digest the high inflation of tokens? To match the growth speed of users, or to increase the usage frequency per user? If it cannot be matched, will you adjust the release plan or will you introduce new value sources? Where do the value come from? Outside or inside?
Simulation of key node unlocking (private sale, etc.)?
What are the differences between the current circulation, tokens' allocation&release plan, and token distribution? If there are huge differences, find the reason?
Does the flow of token supply really make helpings the development of the project?
Token Demand
Why are users willing to hold your token? Practical scenes, passive benefit, or emotional value?
Where does the passive income comes from, additional issuance or protocol value capture? Is the pratical usage necessary? How to coordinate these two factors?
Why do users hold more tokens of yours than other competitive projects?
What are the behavioral assumptions of your token holders? Their goals, motivations? How will they act in different situations, the possible impact on the economic system, and what mechanisms can constrain or promote them?
Any need for staking?(i.e. any need to incentive user to lock their tokens at some stage and the price you can afford) What are the advantages and disadvantages? How you arrange your staking income(reward assets, amount, vest forms, etc.)?
Is there any burning plan set? Official burning, or user motivated burning? If official, how to cooperate with your project operation?
Orbserving any curves in your design: which variables have causal relationships? What function form should these relationships be?
Governance
Allocation of community responsibilities (Twitter, discord, telegram, etc.)? Community internal structure? What about the release time of the community?
How does the community affect token prices? Which of these impacts come from short-term information and which are the long-term vision of your project? How do market makers respond?
What's the current consensus of the community? How to improve consensus by operation activities?
How to maximize use of information release? When and where the infos reach users?
Is there a community fund? Source from? Is there a complete handling rule?
How do the governance ballots generate? Any input factors (token quantity, staking time, usage indicators, etc.) are considered?
What are the minimum conditions for participation in governance? Attribute design of governance ballots (such as, one-time or permanent)? Ballot destruction conditions?
Validity of governance proposals? Voting process design? Voting weight design?
Ranges of governance proposals(benefit distribution, function suggestions, etc.)?
Considering bribery or not?
What's the assumption of the war for governance power under extreme circumstances? Countermeasures in advance and afterwards?
Tokenomics design is not just simple math of tokens, it's associated with all aspects of your project. You can improve and perfect it during the project cycle if you want more than mediocre. There is only two kinds of tokenomics, common or great. We are all common now, but it's always great we headed.
My twitter: @jojonas_xyz DMs open. Communications welcomed.