Tokenomics is the foundation of any digital asset, defining its value, stability, and growth potential. It is what allows investors to distinguish strong crypto projects from those likely to disappear from the market sooner or later.
Today, the industry includes tens of thousands of cryptocurrencies, with more than 80 having a market capitalization exceeding $1 billion. To evaluate an asset’s potential, investors examine the key parameters of a project, and tokenomics is one of the most important.
What is tokenomics?
Tokenomics is the economic model of a cryptocurrency or token, similar to a business model in traditional finance. It determines how value is created, how assets are distributed, and what incentives motivate participants within the ecosystem.
Statistics show that more than half of all cryptocurrencies ever listed on exchanges have since ceased to exist and become “dead tokens.” One of the main reasons for such failures is weak or poorly designed tokenomics.
According to CoinGecko, out of 7 million crypto assets that existed between 2021 and 2025, only about 3.4 million “survived.”
Projects with well-designed tokenomics generally demonstrate more stable market capitalization, even during periods of high market volatility*.
* Volatility — a metric that reflects the degree of price fluctuations of an asset over a given period. The higher the volatility, the faster and more pronounced the price changes of a cryptocurrency.
Tokenomics is based on four key components:
Supply
Distribution
Utility
Demand
Supply
In tokenomics, supply represents the total issuance volume of a cryptocurrency. It may be:
Fixed. The total supply is limited. Examples: BTC, XRP, ADA, LTC.
Inflationary. The number of coins increases over time. Examples: ETH, SOL, TRX, DOGE.
* Token burning — the irreversible removal of tokens from circulation, usually by sending them to an inaccessible (non-recoverable) address. This reduces total supply and increases asset scarcity.
The lower the supply amid growing demand, the higher the potential price of the asset. A prime example is Bitcoin with its fixed supply of 21 million coins. As of October 2025, BTC trades around $123,000, with 19.9 million coins in circulation.
Important: tokenomics is not static — project teams can adjust emission parameters. For example, Ethereum initially had no supply limit. However, after the 2022 The Merge update, part of the fees began to be burned, making ETH partially deflationary.
According to CryptoQuant, over the past three years, the total ETH supply increased by only 0.5%, and between 2022 and 2024, it even showed net deflation.
Distribution
Distribution shows how fairly tokens are allocated among ecosystem participants. A high concentration of tokens held by the team or investors increases the risk of a price collapse due to large sell-offs.
Distribution methods in tokenomics may include:
Mining (including liquidity mining) — earning tokens by securing the network, validating transactions, or providing liquidity on decentralized exchanges.
Staking — locking tokens to support network security and operations in exchange for rewards.
ICO, IDO, IEO, and other token sales — various early fundraising methods for crypto projects. ICO: direct sale to investors. IDO: token launch on decentralized platforms. IEO: token sale through centralized exchanges.
Airdrops — free distribution of tokens to active ecosystem users or participants of promotional events.
Rewards for ecosystem participation and marketing activities — tokens granted for using services, completing tasks, testing products, or engaging in community initiatives.
Utility
Token utility is the set of practical functions it performs within the project — in other words, what users actually need it for. The more tasks the token helps solve, the higher the interest and demand, resulting in stronger tokenomics overall.
A token may be used for:
paying network fees — serving as the primary means of paying for transactions, smart contract execution, and other blockchain operations;
governance (DAO) — granting holders the right to vote, propose changes, and influence the strategic development of the protocol;
access to specific features — unlocking exclusive or premium functions, restricted sections, or special program participation;
payment for goods and services — functioning as a medium of exchange within the ecosystem or partner networks;
providing liquidity — being deposited into liquidity pools on decentralized exchanges to enable trading and earn rewards.
Examples: ETH and SOL are widely used not only for gas fees but also for NFT platforms and DEX ecosystems.
Demand
The primary goal of tokenomics is to generate sustainable demand. A project must integrate its token into the ecosystem in a way that makes using it both beneficial and essential.
A strong example of demand-oriented tokenomics is demonstrated by Aave and Uniswap, which earned a combined $600 million in September 2025 — 76% more than in March.
In Aave, the AAVE token plays multiple roles: it incentivizes liquidity providers, participates in staking, acts as part of the protocol’s safety mechanism, and reduces the amount of tokens in circulation.
In Uniswap, the UNI token is integrated into governance and reward systems, making participation in the ecosystem economically advantageous.
Examples of successful tokenomics
BNB (BNB)
Since its launch in 2017, the maximum BNB supply has decreased from 200 million to 139 million tokens (−30%). Over the past year, BNB’s price has risen by more than 125%, surpassing $ 1,300, and its market capitalization has reached $181 billion.
Ethereum and Solana
Both projects are known for having strong tokenomics. Their blockchains use staking mechanisms that allow investors to earn passive income. Over the last two years, the amount of staked ETH increased by 26% to 34.2 million, while locked SOL grew by more than 3.5× to 43.2 million tokens.
Example of poor tokenomics
A clear example of weak tokenomics is the TRUMPmemecoin, launched in early 2025.
The project team controls about 80% of the total 1 billion tokens, creating significant risks of manipulation and price pressure.
First, such dominance allows major holders to influence the market at any time through massive token sales, potentially causing a sharp drop in the price of TRUMP.
Second, the limited number of tokens in circulation severely reduces liquidity.
Finally, market perception suffers: investors view this level of centralization as a potential sign of manipulation, eroding trust and limiting the token’s long-term prospects.