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Tokenomics 101:
Maximizing Crypto Gains
ON THE RIGHT TRACK 🚆
In the ever-evolving world of cryptocurrency, many investors are on the hunt for the next 100x return. But making a successful investment in this volatile market is far from just throwing money at random tokens. Instead, it requires a deeper understanding of tokenomics—the economic structure underpinning a crypto project. By mastering this concept, you can identify the projects that have the potential to break out and sustain their value.
Supply and Demand Dynamics đź’¸
At its core, tokenomics revolves around supply and demand, which directly impact a token’s price. Even the most innovative projects can struggle if they don't have well-structured tokenomics. Key metrics like maximum supply and circulating supply play a significant role in determining a token’s value over time.
Maximum Supply: This is the total number of tokens that can ever exist for a project. For example, Bitcoin is capped at 21 million coins, which makes it a deflationary asset. This limited supply is part of why Bitcoin is often seen as "hard money" and is particularly popular in countries facing high inflation, like Argentina and Venezuela.
Circulating Supply: This refers to the number of tokens currently available and actively traded in the market. For instance, Solana has a circulating supply of over 400 million tokens, but its maximum supply is unlimited due to its inflationary design. Inflation, in this context, means new tokens are regularly created to reward network validators.
While inflationary tokens can still thrive, excessive inflation can dilute their value over time. As a rule of thumb, investors should ensure inflation rates are manageable. To evaluate this, check how many new tokens are emitted daily and convert that into a dollar value. If market demand can’t keep up with this inflation rate, it could signal trouble ahead.Leveraging Token Burns 🔥
Some projects use deflationary mechanisms like token burns, where tokens are permanently removed from circulation. Ethereum, for example, burns a portion of its transaction fees, which helps reduce its supply over time. Since the Ethereum Merge, over 3.5 million ETH has been burned, which has supported its price stability during market downturns.
When searching for high-growth projects, prioritize those with deflationary tokenomics or a capped maximum supply. These characteristics can indicate better value retention in the long term.Evaluating Market Cap đź“‘
A key factor to assess when evaluating a crypto project is its market cap, calculated by multiplying the circulating supply by the current price. If you're aiming for high returns, look for projects with a relatively low market cap.
Large-Cap Cryptocurrencies. Cryptocurrencies with a market cap exceeding $10 billion fall into the large-cap category. These assets are generally considered lower risk, thanks to higher liquidity and greater resilience against market fluctuations. BNB Chain (BNB) is a prime example of a large-cap crypto.
Mid-Cap Cryptocurrencies. Mid-cap cryptocurrencies have a market cap ranging from $1 billion to $10 billion. While they carry a moderate level of risk and are more volatile than large-caps, many investors see potential for growth in this category, believing there are untapped opportunities.
Small-Cap Cryptocurrencies. Small-cap cryptocurrencies, with a market cap under $1 billion, are viewed as the riskiest investments. Though they offer significant upside potential, they are more vulnerable to market volatility and often lack the liquidity needed to absorb sudden, high-volume trades.
However, don’t stop at market cap alone. Consider a project’s Fully Diluted Valuation (FDV), which estimates the total value if every token was in circulation. Some projects initially release only a fraction of their tokens, creating a deceptively low market cap while their FDV remains sky-high. This can be a red flag, indicating a large influx of tokens yet to enter the market, potentially suppressing prices as they are released.Importance of Trading Volume ⬆️
To validate a project's market cap, examine its trading volume. A high volume-to-market cap ratio suggests strong market interest and liquidity. A ratio above 0.001 is generally healthy. Be cautious with projects that boast high market caps but show low trading volumes, as this could indicate artificial inflation.
Distribution Models 🧱
Lastly, scrutinize a project’s initial token distribution and vesting schedules. Ideally, tokens should be broadly distributed, with significant allocations for the community rather than just insiders or early investors. When a large percentage of tokens is held by venture capitalists or founders, there’s a risk of significant sell-offs once their tokens unlock, driving prices down.
Tokens with a fair launch model, like Yearn Finance’s YFI, distribute all tokens to users without reserving any for the team. While these types of launches are rare, it's wise to steer clear of projects heavily skewed toward insiders, especially those with aggressive vesting schedules that could lead to periodic price drops.
COIN SPOTLIGHT 🔍️
Peeling Back Layer 3
Layer 3 represents the third tier in blockchain technology, focusing on specialized frameworks that extend beyond Layer 1 and Layer 2. While Layer 1 involves the primary blockchain (e.g., Bitcoin, Ethereum) and Layer 2 focuses on scalability solutions, Layer 3 adds advanced capabilities to address complex challenges. This includes improving privacy, optimizing performance, and delivering application-specific solutions tailored to industry needs.
Here are a few the top Layer 3 projects worthy of consideration.
Aragon (ANT) specializes in governance, providing essential infrastructure for Decentralized Autonomous Organizations (DAOs). It simplifies the creation and management of DAOs, offering a robust plugin for governance processes. A standout feature is Aragon’s gas-free, globally verifiable voting solution, which significantly reduces the cost and complexity of managing DAOs.
Chainlink (LINK) bridges the gap between blockchains and real-world data. It enables reliable, tamper-proof smart contract execution, ensuring faster data access with an impressive 99% uptime guarantee. Chainlink’s well-tested solutions are trusted across DeFi platforms for their security and robustness making it a go-to for many DeFi projects.
Ethereum Name Service (ENS) revolutionizes decentralized domain registration, allowing users to name websites, wallets, and more across multiple blockchains. With over 500 integrations, ENS ensures users have full control over their domains, enabling censorship-resistant and decentralized websites. Its compatibility with traditional DNS bridges the gap between conventional and decentralized digital identities.
Filecoin (FIL) offers a decentralized, permanent data storage solution using the Interplanetary File System (IPFS). It supports integration with Web3 and DeFi protocols, making it invaluable for industries like video and music streaming. Filecoin allows users to monetize unused storage space while the IPFS integration boosts online data security, making it a top choice for decentralized storage.
Flux (FLUX) is a major player in decentralized cloud infrastructure, providing a scalable platform for developing, managing, and scaling dApps. Its decentralized network supports a broad range of applications, offering robust infrastructure and daily rewards to incentivize node operators, helping to drive the evolution of cloud scalability in the Layer 3 space.
iExec (RLC) enables the creation of Web3 applications without technical expertise, functioning as a blockchain marketplace for custom solutions. By fostering creativity and innovation, it supports custom Web3 app development. iExec’s membership in the Enterprise Ethereum Alliance (EEA) further establishes its credibility in the blockchain ecosystem.
Ocean Protocol (OCEAN) transforms data into tradable assets, serving as a marketplace for data providers and consumers. Widely used in sectors like digital real estate and music streaming, Ocean enables secure, privacy-focused transactions. Its native ERC-20 token also plays a significant role in the market, facilitating interoperability between ERC-721 NFTs and ERC-20 tokens.
Quant (QNT) excels in connecting public and private blockchains through its Overledger DLT gateway, offering unmatched interoperability. It supports multi-ledger tokens and multi-DLT smart contracts, making it a top choice for enterprises seeking seamless integration.
The Graph Protocol (GRT) is a leading protocol for data indexing, often referred to as the "Google of blockchains." It uses GraphQL to enable quick data access and cross-domain interoperability, making it essential for DeFi, governance, and social media applications.
These Layer 3 projects exemplify the next wave of innovation in the blockchain space, offering powerful tools to address scalability, privacy, and efficiency challenges. As the crypto industry continues to mature, Layer 3 solutions will play a crucial role in unlocking new possibilities for decentralized applications.
FINAL SPIN 📽️
NOTABLE QUOTES 📚️ 📽️
“There is nothing wrong with describing Conservatism as protecting the Constitution, protecting all things that limit government. Government is the enemy of liberty. Government should be very restrained.” -- Ron Paul
GARAGE LOGIC 🎙️
Climate Change Swindlers
“It wasn’t originally a climate thing at all ... we really think of it as a how-do-you-change-the-entire-economy thing.”
In other words, the intent of the Green New Deal is to use climate alarmism as a false flag excuse for dismantling America’s capitalist economy.
That stunning pronouncement by Congresswoman Alexandria Ocasio-Cortez’s chief of staff, Saikat Chakrabarti, is just more evidence to conclude that climate alarmism is being used as a Trojan horse to justify the stratospheric new carbon taxes clamored for by progressive elites like Al Gore, Barack Obama, John Kerry, Hillary Clinton, and Joe Biden, not one of whom has ever denounced the profoundly anti-American sentiments of two of the UN’s top climate officials.
The words of one of those officials revealed that such taxes would be used not for environmental healing, but to fund the most massive redistribution of wealth in history, literally trillions of dollars extracted under false pretenses from hard-working U.S. taxpayers, and handed over to corrupt governments of every undeveloped nation on earth, all in the guise of “climate aid.”
Outraged that President Trump dealt their plan to redistribute America’s wealth a setback when he withdrew the U.S. from the Paris Climate Accords, the high-profile socialists who preach climate fear would have you believe they’re nothing more than environmentally-concerned citizens who would never even dream of participating in a subversive attempt to quietly turn their country socialist.
No intelligent person can fail to see that the modern Party of Chaos is using climate alarmism as a ruse to help culminate Barack Obama’s vow to “fundamentally transform the United States of America”. But because political egos are loathe to admit they’ve been duped; many patriotic liberals will continue allowing themselves to be led like sheep into the closing oppression of socialism. Fortunately, for most sane Americans, the winds of change are beginning to shift.