Tokenomics is a portmanteau coined by combining token and economics. It simply refers to the economics that determines the supply and demand of a token. Tokenomics is important because it describes the math and incentives that govern a token. It details how a cryptocurrency works and whether investors will find it appealing over the long term.

Tokenomics is similar to an analysis of the supply of money in an economic system. If more money is printed, inflation is likely to occur. The same can be said for digital assets. Cryptocurrency investors usually scrutinize a project’s tokenomics to determine what its future value will likely be. They ask questions such as the following:

  • How many tokens are in circulation?
  • What is the coin’s max supply, and at what rate are new tokens being produced?
  • Who owns the coin?
  • Do the developers of a project control a significant amount of the token supply to the point of influencing its price?