We live in a world where digitized items are getting all the love and attention all due to the benefits they come with. This includes the cryptos or digital coins as well. The craze around them was caused by their rising prices and their value as investments. Slowly NFTs or crypto collectibles were introduced, and these are also a part of gaming worlds as well. Some games have introduced their own digital coins to fuel the environment like BattleSpecies, while some offer usable cryptos as rewards.
Tokenomics remain as integral part of the whole thing- it is the summation of all the elements that make a crypto interesting for investors. This covers everything from a token’s quantity and issuance method to factors like its utility.
Few things about crypto economics
Here, individuals who dedicate their computational power to finding new blocks, populating them with data, and adding them to the blockchain are rewarded with new coins. This is how blockchains like Tezos operate, and it’s the paradigm that Ethereum is going towards with its 2.0 update. Staking compensates people who carry out a similar duty by locking away a number of tokens in a smart contract instead.
To encourage users to buy and stake tokens, decentralized finance platforms offer high yields. Tokens are staked in liquidity pools, and vast collections of cryptocurrencies that drive services like lending systems and decentralized exchanges. New tokens are issued as payment for these yields.
Burning of tokens-
Some blockchains or protocols “burn” tokens, removing them from circulation permanently, to cut down on the amount of currency in circulation. Reducing a token’s supply should serve to boost its price as the remaining tokens in circulation become rarer, according to the principles of supply and demand. Ethereum began burning some of the tokens used as transaction fees in August 2021 as opposed to delivering them to miners.
It determines a token’s maximal supply based on limited vs. infinite supplies. For instance, according to the token economics of Bitcoin, only 21 million coins can ever be produced, with the final coin scheduled to enter circulation in the year 2140. In contrast, Ethereum has no upper limit, despite the annual constraint on its issuance.