π€Design
Encourage those who contribute
Rewarding those who contribute benefits the network's growth and aligns incentives with users.
It's crucial to note that rewarding contributors is a vital aspect of successful tokenomics, as it links the contributors' success with that of the users and the protocol.
Enhance the product
A crucial difference between good and bad tokenomics lies in how the token enhances the product. If the token doesn't significantly improve the product beyond fundraising, it's a sign of poor design.
Ethereum's tokenomics improve its core distributed computing capability, enabling secure processing of economic contracts that wouldn't be feasible otherwise.
Maker DAO and Curve benefit from their tokens by fostering community engagement and aligning incentives, thereby enhancing their respective products.
In each case, the presence of tokens enhances the product. While the product could exist without the token, it becomes stronger because of its inclusion.
Advantage for holders
Tokens should benefit holders instead of solely extracting value from them, avoiding a "ponzinomics" approach. These benefits can include utility or social advantages, not just monetary gains.
Various protocols utilize strategies such as staking, locking, slashing, and escrowing to reduce the velocity of money, although a slower velocity might not always be advantageous.
Explicitly incorporating a mechanism that directly benefits token holders should be an integral part of the design process.
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