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TOKENOMICS ANALYSIS AND PRICE SCENARIO MODEL


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  • The first section of this article defines tokenomics, its significance, and the key elements that constitute it. We also look at simple frameworks for analyzing any tokenomics design.
  • Section two draws from our last article on Token Valuation Metrics to begin the first step of using the price scenario model.
  • The final section explains how to convert findings from the tokenomics analysis discussed in the first two sections into simple price projections using a price scenario model.
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  • Is this a protocol I see myself using?
  • Is this a protocol I see other people using?
  • Does this protocol have to exist on a blockchain?
  • How does the token make the protocol any better?
  • Can this protocol achieve its goal without using the token?
  • Can I access this protocol’s full functionalities without holding the token?
  • Is an ERC20/ERC1155/ERC720/Soul-bound token the right fit for this protocol?
  • Account for receiving parties of initial distribution and their percentage — especially that of the early investors and team.
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  • Account for the token sales rounds and fundraising. Assessing the investment cost for early investors helps estimate the price they could sell in the future. It gives you a sense of the impending sell pressure for an asset.
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  • What is the source of revenue? The higher the portion generated from network activities, the better.
  • How is the revenue shared between protocol and supply side?
  • How is the revenue spent?
  • Is the protocol profitable? Is revenue minus cost positive?
  • How much runway does the protocol have? The higher, the better, as long as productivity or user experience is not sacrificed.
  • How well can the revenue scale? This helps in detecting Ponzi schemes in disguise.
  • Does the network growth positively affect the revenue and vice versa?
  • Is the revenue growth tied to the token price? Revenue growth should have a positive impact on price.
  • How is this revenue affected by different market conditions?
  • What is the revenue to network expenses ratio?
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  1. Projects are proposed, and curated, by the community.
  2. Projects are funded by Network revenue, and Network reward.
  3. As projects do work and add value, network revenue goes up and $TOKEN goes up, and ever-more funding goes to the community.
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  • The model assumes the projected circulating supply is accurate and remains the same throughout the investment.
  • The model assumes the efficiency of technical analysis for the total crypto market cap and token dominance analysis.
  • The model assumes a high correlation of individual cryptocurrencies with the general market performance.

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