1. Universal Layer

In this layer, we establish the fundamental metrics and monetary policies. This includes analyzing data to identify macro-specific factors that can impact the success of your token.

Includes

‣ Token Fundamentals → Flow chart and definition. ‣ Metrics 1) Supply 2) Token System ‣ Monetary Polices a) Token Allocation b) Vesting release schedule

Token Fundamentals

To begin, we work closely with the client to understand their goals, target audience, business model and objectives. We then define the utility of the token and design the flowchart for their token's ecosystem.

Flow Chart

Monetary Polices

Monetary Polices are a critical component of tokenomics that deals with the supply and distribution of tokens. It is similar to the monetary policy of traditional economies, where the central bank controls the money supply to manage inflation and economic growth. In the context of cryptocurrencies, the monetary policy determines how new tokens are created, emitted or unlocked and distributed among the different pools or shareholders. This process is called allocation distribution. We also define the rate, accelerations and velocity at which new tokens are introduced into the system through a process called vesting schedule. The goal of our monetary policies structures is to balance the demand and supply of tokens, maintain their value, and prevent hyperinflation or deflation (in some cases). We also aim to incentivize the right users to participate in the network and reward them for their contribution through various incentive mechanisms.

Allocation Distribution

Allocation Distribution

A few key considerations we take when designing a token distribution strategy are: Alignment with business goals We make sure that the token distribution strategy is align with the business goals and ensure that tokens are distributed in a way that supports the project's mission and vision. When distributing tokens for our target users, we will ask specific actions we need from them in return. For example, a decentralized lending platform may choose to distribute tokens to borrowers and lenders, while a gaming platform may choose to distribute tokens to game developers and players. Fair and equitable distribution Token distribution should be fair and equitable, ensuring that tokens are distributed among different participants in a way that is proportional to their contributions or engagement with the network. Also Its very important that the different investor rounds (strategic, seed, private and public) have fair rules on the side of the price per token and vesting release rules. Attractive to the investors perspective We make sure to design a token allocation strategy that is attractive for private investors and healthy to the eyes of the retail investors.

Vesting Schedule

Vesting Schedule

Vesting is a process where a certain amount of a project’s overall token supply is set aside for a period of time and released after certain conditions are met. The process of holding, locking, and releasing these tokens is referred to as vesting.

The vesting schedule has some key elements: Token generation event (TGE) Is the exact date when a project launches a token on an Exchange, centralized or decentralized. It is also the first date where investors and the other pools have the opportunity to get tokens unlocked.

Cliff Period The cliff, meanwhile, is a feature that ensures that the investors or other pools have to wait a defined time to start receiving the tokens, known as the lockup time. This works as a durational lock placed on tokens ahead of the vesting schedule. It is primarily used for the team and foundation, seed and private sale investors pools.

Vesting Types Linear Vesting: The distribution of tokens in equal parts within a certain period of time is known as linear vesting, this means that the amount of tokens and periods are proportional. For example, 10% of the vested tokens are released every 6 months. The time period can be days, weeks, months or even years. Twisted or Graded Vesting The distribution of tokens is random within a variety of time periods. The time period varies from days, months, quarters or even years. In twisted vesting, you don’t see a linear pattern in distribution. For example: 25% of 600,000 $EXAMPLE tokens can be released monthly for the first 3 months and then 75% of $EXAMPLE tokens can be released followed by a 6 months cliff. The twisted pattern is usually seen in tier1 projects or layer 1 blockchains to maintain token pricing.

Metrics

Establishing metrics is paramount when launching a new token, as they pave the way for the project's economic model. To create a successful token economics framework, there are several key metrics we need to consider. These include:

Supply Metrics

Three Core Definitions

Max supply the maximum number of tokens that will ever exist. Circulating supply the number of tokens currently available for trading.The circulating supply is the best approximation of the number of assets that are circulating in the market and in the general public's hands. The Circulating Supply is a much better metric than Total Supply for determining the market capitalization. The method of using the Circulating Supply is analogous to the method of using public float to determine the market capitalization of companies in traditional finance. Initial Supply Initial supply is the amount of tokens released in the initial launch of a token. These tokens are released to encourage liquidity of the ecosystem and price discovery. There are multiple strategies for initial token launches that we recommend to execute depending on the nature and purpose of the protocol.

Large Token Supply

There are several reasons why some project founders prefer a larger token supply rather than a smaller supply:

Psychological Effect A larger token supply can create a perception of affordability and early adoption among potential buyers, which can lead to increased demand and adoption.

Liquidity A larger token supply can also increase liquidity, making it easier for buyers and sellers to transact with each other. This can be especially important for tokens that are intended to be used for trading or as a medium of exchange. Distribution A larger token supply can allow for broader distribution, which can help to increase decentralization and reduce the risk of centralization or concentration of tokens in the hands of a few holders.

On the other hand, some project founders may prefer a smaller token supply because it can create a perception of scarcity and exclusivity, which can potentially increase the token's value. Additionally, a smaller supply can also help to reduce the risk of inflation and ensure a more stable token price by reducing the supply shocks.

Small Token Supply

On the other hand, some project founders may prefer a smaller token supply because it can create: Scarcity sensation As mentioned earlier, a smaller token supply can create a perception of scarcity and exclusivity, which can potentially increase the token's value.

Lower Inflation Risk A smaller token supply may have a lower risk of inflation since there are fewer tokens that can be created. This can help to maintain the token's purchasing power over time.

Easier to understand A smaller token supply can be easier for users to understand and calculate, as they don't have to deal with as many zeros when transacting or trading.

Token System

Single vs Dual token A dual token system in crypto refers to a system that involves two different types of tokens used within a single blockchain network, protocol or even game economy. One of the tokens typically serves as a utility token, while the other is a security token.

Positive

The benefits of a dual token system in crypto include:

1. Better Governance: The use of a security token provides a means of voting and decision-making for stakeholders, enabling more effective governance of the network.

2. Reduced Regulatory Risks: Separating the utility and security tokens can help to mitigate regulatory risks, as the security token can be subject to securities regulations, while the utility token can remain unregulated.

3. Increased Access: A dual token system can provide greater access to different types of investors, as it allows for both accredited and non-accredited investors to participate in the network.

4. Incentivization: The use of a utility token can incentivize users to participate in the network and perform certain actions, such as staking or voting, by providing rewards in the form of the utility token.

5. Flexible Monetization: By separating the utility and security aspects of a project, a dual token system can offer more flexible monetization models. The utility token can be used to access the network's features and services, while the security token can provide a means of generating revenue through equity or profit-sharing arrangements.

Negative

While there are several benefits to a dual token system in crypto, some people argue that it can be negative for liquidity. The main argument against dual token systems is that they can create unnecessary complexity, which can make it harder for investors to understand and value the tokens. This complexity can lead to lower liquidity, as investors may be hesitant to invest in a system that is difficult to understand.

Another reason why some people believe that dual token systems can be negative for liquidity is that they can lead to fragmentation in the market. With two different tokens, investors may need to trade both tokens to fully participate in the network, which can make it more difficult to buy and sell the tokens. This can lead to lower trading volumes and less liquidity overall. In addition to the potential negative impact on liquidity, there are some other arguments against dual token systems in crypto. These include:

1. Regulatory Uncertainty: The use of a dual token system can create regulatory uncertainty, as the two tokens may be subject to different regulations and legal frameworks. This can create additional compliance and legal challenges for project developers and investors.

2. Governance Challenges: Dual token systems can create governance challenges, as the two tokens may represent different types of stakeholders with different interests and priorities. This can make it harder to reach consensus and make decisions that are in the best interests of the network as a whole.

3. Value Discrepancies: Dual token systems can create discrepancies in the value of the two tokens, as they may represent different aspects of the network or project with different levels of demand and utility. This can create confusion and uncertainty for investors, and may lead to disputes or dissatisfaction with the token model.

Overall, while dual token systems in crypto can offer a range of benefits, they also come with some potential drawbacks and challenges that need to be carefully considered by project developers and investors.