Tokenomics – What Works & What Doesn't When Launching
Updated: Aug 25, 2022
The questions raised when launching a token today:
What are some of the considerations you need to make around the tokenomics?
From a marketing perspective, what works, what doesn’t?
We brought in Jonny Bear, from Moonbear who recently launched their token to share their insights. With thanks to Teresa Song and Bianca Buzea for their notes.
Moonbear finance (MBF) is a decentralised finance (Defi) token, inspired by a multitude of tokenomics. (Like Hex, savings account in crypto. Stake a token for a predetermined period of time, longer staking period = more rewards. Deflationary tokenomics: EverRise, SaveMe).
Moonbear is a hybrid of the above.
Fixed supply vs Deflationary vs Inflationary Tokenomics
Some tokens have a fixed supply – the market cap of the token is dependent on the number of tokens in circulation x price. When tokens are in circulation, they are locked up (e.g. in treasury or through people staking), so you often find a market cap with huge valuation (fully diluted). This doesn’t mean this is the actual number in circulation, so the actual market cap is lower.
Consider the release/vesting schedule for these tokens.
Deflationary tokens are when the scarcity of the token increases. In theory, this leads to a price increase (Eth burning, price goes up). The understanding is that as supply goes down, scarcity increases. Fundamentally this is based on supply and demand for the token.
BUT when smaller value tokens burn tokens, the price doesn’t always go up. The market never thought that much value existed for this token in the first place, so burning tokens didn’t move the token price. In this scenario, you’re worse off, because you’ve just burned your tokens without the price being affected.
There are very specific cases as to why you would have an inflationary token (e.g. HEX – deposit staked and then you have a higher interest rate for a longer lockup)
Most tokens do not use this model.
The reality is that if projects release version 1 of their tokenomics, they can pivot to a version 2 with a very different tokenomics model regardless of any Simple Agreement for Future Tokens (SAFT). SAFTs are not legally binding.
Consider: What will create the buy pressure and sell pressure of your token? Why are people willing to buy it in the first place?
What has worked for marketing strategies to build a quality community/following?
Post-launch MBF are trying to build a sustainable community and ultimately it’s through word of mouth.
Adding additional functionality so you can buy MBF tokens directly from their site and offering the ability to buy and stake in one transaction, being rewarded with a 10% token bonus if you do. This encourages buy-ins.
Airdropping tokens when you see people buying other competitors tokens
Direct Messages to people in other communities and having 1:1 conversations has proved fruitful
It’s difficult at the beginning because everyone is doing the same thing, trying to get in front of the same audiences
You’re competing against where the market wants to go: eg memes, metaverse, play to earn (P2E) games.
If you don’t have these in your roadmap or product, then you find people will liquidate your token and move to what is hot, movements are made on short term returns.
When people can put their money anywhere, why would they put in your token?
when targeting investors, need to have a clear USP
tokens are putting the word metaverse on their website/roadmap, to attract interest
a lot of marketing is influencer led on crypto
hard to keep attention of people on community. telegram especially, but discord is better, not many projects can run both. Optimal: Discord community and telegram for announcements
need to have partnerships in Web3
decentralised partnerships are a bit easier. exchanges take longer
AMAs are a good way to build a community
Getting your community to identify themselves with a name: Lady Gaga —> Monsters, allow community to be part of building it, feel involved, strong emotional connection between those that identify with the name
what will create buy and sell pressure for token (if you giveaway a token, they may just go ahead and sell it). Need to bear in mind why they buy it in the first place —> What is the utility of your token = key question
Things to think about
Different launch mechanisms:
Eg Dutch auction mechanism vs. whitelist
Which chain do you launch your project on?
What if you decide to use multiple chains, what are the complexities of running your token then?
Gnana’s project: Marketing/outreach for a platform where you can sell NFTs and a portion of the sale can be donated to charity.
Things to bear in mind when dealing with charity tokens:
Charity needs to come second to making profits
People don’t need to buy a token to give money to charity
People use P2E etc. to make money, not necessarily to give to charity
Need to find a way to attract investors not just those that want to donate to charity