Why Businesses Need Tokenomics

Businesses can create a self-governed microeconomy on a decentralized network with their own currency or tokens.

In the past few years, most of these artificial economies or initial coin offerings have failed because creators didn’t study or analyze their tokenomics. Instead, there’s been a race to generate buzz and make quick money.This hasn’t impressed investors, as the creators didn’t try to create a management strategy for their currencies. Speculation-based returns are too risky and unstable, which is why these currencies failed.
Below are the prominent reasons supporting the need for tokenomics:

A micro-economy can have the same problems as a traditional economy, such as volatility, inflation, and crashes. These problems can impact the long-term viability of a decentralized network-based business.

Helps to predict the suitable incentive models for network participants.

Helps to predict the proper distribution model to generate network effects.

Automates the data collection on transactions to create matrices for the network, product, services, user adoption, the volume of transactions, etc.

Can generate the token fee, grant, and stake model.

Predicts the accurate price of the token.

Fundamental Challenges in TokenomicsTokenomics can be challenging for many reasons. Some of these include:

Lack of standardization and institutionalization of techniques,

models, and tools.

Potentially expensive and cumbersome to construct bulletproof tokenomics for a network as this requires a team of mathematicians, economists, product specialists, architects, and programmers to run correctly.

Identifying the proper consensus mechanism for a network.

Conflicting incentive model design.

Infrastructure investment.

In the pre-ICO stages, economists generate tokenomics based on prediction as there aren’t any users or clients available at this stage.

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