by Giacomo Arcaro, Black Marketing Guru
No matter what you have in mind – be it an ICO, or an STO – launching a successful token issuance is one of the most laborious, wide-ranging, and detail-oriented tasks in the blockchain industry. In addition to countless hours of strategy planning sessions and marketing meetings, an ICO/STO team must very carefully run each and every part of their plan. Perhaps, the most crucial point of the plan is its “tokenomics”, short for token economics.
Token economics is the allocation of tokens used to modify or incentivize specific behaviors, thus creating strong communities with the underlying goal of entering a valuable crypto asset in the market.? Anything that impacts the value of such crypto asset falls under token economics. In simple terms, tokenomics is the analysis and description of the design and function of the entire token ecosystem.
Surely, there have been a tremendous amount of companies promoting “innovative ideas” lately, especially in the ICO business, but a horrifyingly high number of those have raised the necessary capital and gone on to struggle, disappointing coin holders and contributing to the general opinion that the ICO market is currently just a big “scam”. This is partly why countries like the US, South Korea, China, and India have already cracked down on cryptocurrency trading and ICOs. In fact, evidence shows increasing regulatory pressure. The same regulatory pressure is enforced on STOs, which are supposed to be fully compliant with national regulations and which cannot count on the good old marketing skills of the team and its advisors in order to be successful but need to show consistency and substantial project schemes. Especially now, in such a hard environment, it is paramount for blockchain startups to get their tokenomics right, not only focusing on the internal operations of the technology and protocols behind the token (ledger layer), but also on its attractiveness to potential investors (market layer). The token itself must act like the perfect interface, and the whole ecosystem must look like a perfect architectural structure, the product of a well-experienced “token model architect”.
Token economics is usually made of five areas of analysis: consensus mechanism, i.e., the fault-tolerant mechanism used in the blockchain system to secure the data and verify transactions; token design and function, i.e., optimization design of the token and of its technical functions, in collaboration with the development team, and mechanism design, using the game theory approach, all of which must be overlooked by legal experts for a real-time compliance check; market penetration analysis, i.e., the analysis of the target market and determination of the ideal market penetration strategy, in accordance with the feasibility of fundraising goals in relation to said target market, so that the goals remain attainable in bear/bull market and take into consideration the interests of all stakeholders; supply and demand analysis, i.e., the determination of the total fundraising target, the amount of tokens to be distributed, and the price per token; lastly, token distribution, i.e., the planning of a successful distribution model, including decisions on whether the coins will be pre-mined, will have an unlimited/limited supply (monetary policy and inflation-dealing rules), will be sold on exchanges, will have a lock-up period.
The basic assumption in token models is that people act upon incentives. In token economics, these incentives are mostly financial, since they are the tokens themselves, and they are used to motivate network members to behave to the benefit of the network, while acting in their own interest as well. This pivotal role of the token must be precisely defined by the token model architect, and continuously checked upon, so that any unexpected external shocks do not shake the structure of the model too much.
Given the importance of tokenomics in every ICO/STO project, and given that I myself, as a strong supporter of the crypto world, would like to see the projects that I advise make it not only through the hype, but increase the demand for their tokens in the long term, I have researched the top 10 token model architects in Europe, of which I was very glad to see that the first three are Italians, and want to share my personal ranking, thus helping teams of new-coming projects in the selection process of the right experts. So, here we go:
#1 – Eloisa Marchesoni: https://www.linkedin.com/in/eloisa-marchesoni-blockchain/
#2 – Luigi Di Benedetto: https://www.linkedin.com/in/luigi-di-benedetto/
#3 – Michele Ficara: https://www.linkedin.com/in/ficara/
#4 – Lex Goetz: https://www.linkedin.com/in/lex-goetz-%E2%9C%85-tokenomics-59ba9740/
# 5 – Miguel Caballero: https://www.linkedin.com/in/micaballero/
# 6 – Sergei Logvin: https://www.linkedin.com/in/sergei-logvin-2914bb52/
# 7 – Robert Stone: https://www.linkedin.com/in/rostone/
# 8 – Richard Kastelein: https://www.linkedin.com/in/expathos/
# 9 – Mikhail Ananyin: https://www.linkedin.com/in/ananyinm/
# 10 – Laura Zaharia: https://www.linkedin.com/in/laura-zaharia-a0802414a/
Since we still are in the fluid stage of the blockchain technology, which will most likely reach its specific stage in about ten years from now and no sooner, the question as to whether a coin will actually be used is still highly speculative. Only an in-depth analysis of the tokenomics behind a cryptocurrency and of its purpose of issuance will provide insights on whether there will be a demand for it in the long term, which is of course proportional to the vastity of its use cases.