01 Juli, 2020 

What Token Economy Is And Why It's Necessary

In this post, we will talk more about what tokens are in the world of cryptocurrency operations, why a token economy is needed, and what basic patterns should be taken into account in the process of using tokens.
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What Token Economy Is And Why It's Necessary

What Is A Token?

A token is a unit that represents a certain value in the blockchain ecosystem, while not being directly a cryptocurrency. In different ecosystems, tokens can be equivalent to different values. It can be a voice, share, stock, access, or ownership. The token is a register entry and is managed by a smart contract.

Tokens are used and operate on the basis of the token economy. Token-economy, or tokenomics, is a set of criteria and laws of the economic order, according to which there is an interaction of sellers and buyers of digital assets, their prices, and the functioning of the ecosystem of such relationships.

Why Do We Need Tokenomics?

The economy of tokens helps to understand how the value of tokens is formed, what factors affect their value, how it can be used in your project, if you are involved in a blockchain startup — and is it worth buying or trading with certain tokens if you are an investor or the trader.

What Exactly Does Tokenomics Study?

  • The purpose of the token — what its functions are, why it's needed at all, what its purchase provides to the buyer.
  • Token functionality — the scale level, possibility to sell it on the crypto exchange
  • Token stability — whether it is a subject to inflation and volatility
  • Token distribution — how they are distributed among users, how they can be obtained in addition to buying.
  • Read also How Social Listing Works On BTC-Alpha Platform

    Main Laws Of Tokenomics

    We will not describe everything here, just focus on the main ones, so that you understand what patterns work inside the token market. If it's interesting, you can follow the link to discover the full set of tokenomics laws. Let's look at the main ones.

    1. Token's Retention Time: The Longer The Better

    Investing in tokens that quickly go out of the hands of their owner makes no sense. No long-term prospects will appear on the market for such tokens. Therefore, buyers should be interested in acquiring tokens for the future and keep them as long as possible.

    2. Token's Retention Period Should Be Longer Than Transaction Period

    This is one of the reasons why it is more profitable for buyers to purchase tokens with a margin and keep them. Cryptocurrency transactions can take quite a bit of time, but buying cryptocurrencies for fiat can be a very early process.

    3. White Paper Covers Not All The Aspects (Not Always, But Often)

    And this is not the fault of unscrupulous startupers. Many options become usable after the launch of ICO or social listing. Do not forget that the cryptocurrency market is not yet so predictable to take into account and anticipate absolutely every little thing at the project development stage.

    4. Tokens Should Be Bought And Sold

    Users should have reasons to buy tokens, and not just get them for fulfilling any conditions. Moreover, each ecosystem should strive to ensure that tokens are not only bought but also sold by its participants. This will provide liquidity and stimulate the development of the ecosystem, as well as give more opportunities to token holders.

    Now, in addition to ICOs, community consolidation around the token can occur during the social listing on the exchange. What is it and how it works, read in our post about social listing. Also, until the end of June 2020, the BTC-Alpha team provides discounts on social listing.

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