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Tokenomics is all about understanding the supply and demand dynamics behind crypto assets. While cryptocurrencies are characterized by predetermined issuance timelines. The supply side of tokens largely depends on the token issuance. Whereas the demand for cryptocurrencies depends on price, use case and long term prospects. Tokenomics could be referred to as an equivalent of traditional economics but confined to the crypto ecosystem.
The supply aspects of Bitcoin are confined to its production capabilities. The number of Bitcoin in circulation to a maximum is just 21 million assets. Bitcoin’s limited supply and potential scarcity in the future make it a top-notch digital asset. With he distinction of being the first-ever digital asset and the subsequent wider adoption, Bitcoin stands on top of the best cryptocurrency list. The popularity of Bitcoin took its price to a staggering $68,000 last year at the peak of a bull market. However, the tokenomics scenario around BTC is not quite favorable currently. From its all-time high price, Bitcoin is currently down by around 70%. This drastic variation in price from time to time is what drives the tokenomics around various cryptocurrencies.
One of the most important aspect of tokenomics is the application part of the particular crypto asset. The demand for a digital asset is proportional to how well or often it is used by the community. Strong use case for digital assets will automatically drive more value and hence the price for cryptocurrencies. At the same time, crypto projects would need to maintain uniqueness in use case to be able to survive competition.
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