A Beginner’s Guide to Tokenomics for Decentralized Finance (DeFi)
In the world of DeFi, how tokens are supplied and distributed is crucial to the ecosystem’s health and growth. Token supply models come in several forms: fixed supply, where the total tokens are capped; inflationary, where new tokens are gradually introduced; and deflationary, where tokens are actively removed from circulation to increase scarcity. Distribution methods are just as important; they include mechanisms like Initial Coin Offerings (ICOs), airdrops that reward early users, yield farming that incentivizes liquidity provision, and fair launches aimed at community inclusivity. Equally vital is how tokens are allocated among founders, investors, and the community to ensure alignment of interests and avoid concentration of power. Additionally, token vesting schedules and lock-up agreements prevent insiders from dumping tokens immediately, helping maintain stability. These core components form the backbone of effective tokenomics, ensuring tokens serve their intended purpose while fostering trust and engagement.
