100 Questions You Should Ask Yourself When Analyzing Token Economics
You've found a program you like and are considering joining. Before you do, please consult this list. Asking about these really helps avoid false positives and choose better long-term investments in the crypto market.
· Token issuance
· Current related issues
1. Which tokens will the project use?
2. If there are several tokens, why?
3. What is the market cap of the token?
4. What is the circulation?
5. What is the maximum possible supply? (see "Supply" section for more information)
6. What is a fully diluted valuation?
7. Is the token supply inflationary, stable or deflationary?
8. Where can tokens be bought?
9. Why are tokens on these specific DEX/CEX?
10. How deep is the token liquidity on these exchanges?
11. How high is the token trading volume on these exchanges?
12. Who are the main liquidity providers/market makers?
13. Are they long-term engaged or are they incentivized through unsustainable token releases?
14. Which parties (i.e. chain, bridge, team, etc.) do you trust when holding tokens?
15. Does the team benefit from token appreciation?
16. Do users (non-coin holders) benefit from token appreciation?
17. Can the project run without tokens?
- How the project will launch its token
18. Why choose this blockchain to issue tokens?
19. Is the chosen chain the best in terms of security, speed or interoperability?
20. What was the age of the project when it launched its tokens?
21. Which token issuance method was used?
22. How much did the project raise through the token offering?
23. What is the Fully Diluted Valuation (FDV) at launch?
24. How has market cap/FDV changed since launch?
25. How does the chosen initial supply percentage affect future releases and token holder dilution?
— The price of tokens is fundamentally determined by supply and demand. Let's analyze supply first.
26. What factors will affect the selling pressure of the token?
27. How much will the token supply grow in the future?
28. Who holds the tokens?
29. How much supply do the top 10 addresses control?
30. What about the first 100 addresses?
31. When will VC and team be unlocked?
32. Have a large number of coins been lost or destroyed?
33. How much is held by the community?
34. How fair is the distribution?
35. What is the overall release schedule?
36. To whom did the release go?
37. What is their behavior (are they selling immediately or holding)?
38. Can you benefit from the release by staking or providing liquidity?
39. Does the release bring you profit, or does it just protect you from dilution?
40. Why are some issued tokens not in circulation?
41. What happens when locked (or staked) tokens are released?
42. Does the community lock mechanism have batch unlocking?
— Now let's look at the demand, why buy tokens from the market.
43. What are the main drivers of token demand?
44. Are there other project users that can be easily substituted?
45. How did you hear about this project?
46. Will others want this token in the future?
47. What is your expected return for holding tokens?
48. Are there protocol revenue distributions to token holders? (see utility section for details)
49. Does the project buy back and/or burn its own tokens?
50. Will tokens be destroyed or transferred when used to purchase goods/services from the protocol?
51. Does the project have a cult following?
52. How's the energy in their Discord?
53. How active is the project on Twitter?
54. How active is the community on Twitter?
55. How long have they been this active?
56. Will they be active a month or a year from now?
57. Are there game theory driven incentives to hold tokens?
58. Is there a token lock-up mechanism?
59. Like a Ponzi scheme?
60. Is there a destruction mechanism?
— The purpose of the token in the project
61. What is the purpose of the token?
62. Should you hold it or use it for transactions/services?
63. What percentage of project cash flow is allocated to token holders?
64. Are cash flows dilutive or redistributive?
65. Do you intend to sell immediately or hold the proceeds?
66. Are tokens used for governance?
67. If yes, how centralized is governance voting?
68. Will your vote make a difference?
69. What are the minimum token requirements for submitting and upgrading governance proposals?
70. Can governance enable or influence the distribution of profits?
71. Are there governance vote bribes that can be profited from?
72. Can the token guarantee the security of the project?
73. Can tokens be used as collateral to borrow liquidity?
— Token performance since launch
74. Does the token correlate to the broader crypto market (ETH, BTC)?
75. Why hold tokens instead of ETH or BTC?
76. How volatile is the token price?
77. How has the token performed against USD or ETH since inception?
78. Do release/staking proceeds offset any losses?
79. What is the circulation velocity of tokens (velocity = transaction volume / market cap)?
80. What is the difference between current price and maximum value?
81. Does the token price react to positive/negative news?
current related issues
— Bear markets and other related things you should consider
82. Does tokenomics still make sense in a bear market?
83. How was the token affected by the crash?
84. Does token economics work in high volatility and other extreme situations?
85. Are tokens similar to securities (how likely is the SEC knocking)?
86. Is there enough liquidity for you to exit quickly?
87. What happens if everyone quits at the same time?
88. Will user inflow/outflow affect token economics?
89. Is there any partial payment to make up for the loss of the agreement caused by the black swan event?
90. Has the team adjusted token economics in the past?
91. Are there other projects with similar token economics and how are they performing?
92. Are there any known holders?
93. Are they selling or accumulating?
94. Is the project still applicable for the next bull market?
95. Are the token economics of this project superior to its direct competitors?
96. Have you researched the token economics of this project?
97. Is the project behind the token doing well?
98. Are the token economics of the project overly complex, introducing more points of failure?
99. How much data is there to answer all these questions?
100. Are you sure you want to imitate?