Steemit Crypto Academy Contest / S6W3 - Tokenomics in the Crypto Ecosystem.

Hi steemians,
Welcome to my last entry for this week's engagement challenge. Recall that this is week 3 of the steemit engagement challenge for season 6. Today the topic of discussion is titled "Tokenomics in the Crypto Ecosystem", I do hope you enjoy reading through my post today. Let's get started.

The word tokenomics is derived from joining two different words together I.e token and economic. Every crypto asset is valid and attracts more people based on how the tokenomics is valid. So this word plays a very important aspect in the growth of any crypto asset.

In the crypto ecosystem, when we talk about tokenomics we are referring to the projects, how the asset is distributed, the reward gotten from mining the token and even the incentive for holding that very token.

Simply put that tokenomics is the process of studying the economic situation of a particular token or blockchain which involves considering the various factors that make the token grow and also have a good value. So the economic value of the token in the market at any point in time is known as tokenomics.

There are a few aspects I will be listing below that tokenomics covers as far as the crypto world is concerned I.e all of it put together is what we call tokenomics. The increase or decrease in the price of the token, the importance of the use of the token in the blockchain, and many other factors that help the project to stand out among others are what make up the word tokenomics of any asset.

Therefore the economic benefits of any particular asset at any point in time that makes it attract more investors and based on that increase in the price of the asset is known as tokenomics. Investors coming in sees the future of the asset and if they convince enough they invest in it due to the tokenomics of the asset.

The main importance of tokenomics is so that detailed information about the asset in question can be seen by those who tend to invest in that asset. So, therefore, every crypto trader tends to make proper research before investing in an asset. So tokenomics gives the trader the road map of the asset and what the asset is aiming to achieve in the nearest future.

In simpler terms, we can say that the main importance of tokenomics is to explain to prospective investors all about the token they are planning to invest in. Details such as the history of the token, the growth of the token, holders, demand and supply of the token and its advantages over other tokens are key important factors that tokenomics presents to various users.

Another importance of tokenomics is that it tells users about the safety of their investment and how far the project will be valid. People won't involve in any asset that will fold in no time. So the safety and transparency of how their asset will be handled is also information that will be guaranteed to the user before they can go ahead to invest in such a project.

There are many components of tokenomics but for the sake of this work, I will be listing and explaining three which I believe cover the major aspect of tokenomics. The 3 major components include the token supply, the utility of the token and the burning schedule of the token.

Here the total amount of the token to be created as far as that coin is concerned is normally taken into consideration. When launching a coin most times this information is usually given out. It means that this token will be mined and when it gets to the maximum value in the project set then the mining will have to stop.

This is another key factor that is usually taken into consideration. This talks about the amount of token that is currently present in the market at any point in time that is available for trading and performing another form of transaction. This determines the price movement I.e the demand or supply of the asset at any point in time. If the supply is greater than the demand then the price will be low else the price wi be high if demand exceeds supply.

This is another important component of tokenomics that makes the value of the asset attract more investors. We all need tokens that have several use cases because we need something that solves our various problems at any point in time.

When a token can be used for many purposes, that will mean that many users will be using the token and that will lead to more demand for the token hence the price of the token will increase due to the number of people demanding it. Many blockchains have different services that they offer and if a particular asset is used in that blockchain to pay for the services then such a token will be appreciated since it serves those purposes.

Another major component of tokenomics is the burning of the token. To burn a token means to send some portion of the token to a null address where the private key of such address is unknown by everyone. Sending this asset to null destroys the token completely since no one will tend to have access to it any longer.

Burning of tokens is done to reduce the number of tokens in circulation in the market. When this is done, the price tends to appreciate because the number of assets in the market will tend to reduce as well. Since the token won't be much any longer, the demand will increase and that pushes the price upward.

There are many tokens in the crypto world today but for the sake of this contest, I will like to discuss one of the tokens that I too have invested in due to its tokenomics. The token I want us to like today is the Binance token (BNB). From the below screenshot, the BNB token has the following information as presented in the table below.

Based on the above statistics, only about 80% of the maximum token to be supplied is currently in existence. The burn activities also help to reduce the number of tokens in circulation which has helped to increase the price of the token as well. The screenshot below shows the prices from 5 years ago to the present day.

The use case of the token is much which makes many people t of those holding it at the moment. Most projects if not all the projects on Binance which happens to be the world's largest centralized exchange use the BNB token. Since it's the native token of the platform, the gas fee and buying of other things such as NFT require the use of this token. Staking and launchpad programs too all require the use of this token.

Yes, I consider the asset worthy of investing in because of the growth and the use case of the token. Today it is used as gas fees for many transactions. From the screenshot, I shared above about the prices of the asset, you will notice that from year 5 down to year 1 the asset has been on constant growth because of the use case of the asset. And the reason for the decline as of today may be attributed to the crises going on currently in the crypto world.

But it is also clear evidence that when crypto enters into its bullish phase once again, the price may rise even above the one-year-ago price of $564. Another reason is that the project employed an automatic burning process to help stabilise the price of the asset. This is the reason I feel that the token is worthy of investing in.

The importance of tokenomics to investors or traders can never be overemphasised. It is always recommended that before anyone goes to any investment in crypto, he or she should ensure that proper research on that token is made. We all know that crypto trading is very risky. Hence the need for tokenomics.

With the help of tokenomics, traders and investors will get to know the roadmap of the token they are investing on and they will also be able to know when to buy or sell their asset in other minimize loss and maximize profit.

Tokenomics will go a long way to give traders and investors full knowledge about the project and the progress it has made so far. After reading through the white paper, if what the project is said to accomplish within a period is not achieved then, investors or traders will judge if they are to continue with the project or not. In essence, tokenomics will give traders or investors complete detail on how to be on the project with much loss and with many profits.

If I have the opportunity to create a token, the aspects of tokenomics that I would focus on which I believe will drive many investors to it is the utility of the token as well as a burning strategy. These two aspects are great aspects that will go a long to making investors come into the project and thereby helping to increase the price of the asset as well.

Use case of the token:Once a token has several use cases, it goes a long way to bring in investors into the project in question. So I will ensure that the token serves different purposes so that whatever you want to do you must make use of it.

Burning strategy:This is another method that if adopted properly will help the price to appreciate as well. Some projects are designed to endure that in any trade, 50% of the interest is sent to null and destroyed immediately and to me, this is an effective way to grow the price of the asset instead of waiting for months or years before burning some portion of the token. So this is a method I will adopt to help the token grow thereby bringing more investors and traders.

Tokenomics is a very important term as far as the crypto world is concerned. It deals with the details about the crypto asset in question and how investors and traders can be convinced to invest in it. So this is like a library where traders are supposed to check properly and be certain about the project before investing in it. I want to invite @stef1, @jyoti-thelight, @graceleon, @malikusman1 and @karianaporras to also join the contest.