After a business has successfully analyzed the token-to-market-fit, market, mechanism and token pillars, a token launch strategy is implemented. All Web3 projects follow one of the following three strategies for their token launch:
PERP token was launched first and then a product was built by Perpetual Protocol. This strategy helps businesses to raise funds through a token launch which could be used to build the product.
This blockchain project has launched both the product and its token at the same time. This strategy improves investor/user confidence because the team has a working solution/product that can be used by target users. The token when launched, can be utilized immediately on the working product instead of waiting till the product launch.
Let’s talk about what framework we use at Hypermode to design Tokenomics for upcoming blockchain businesses.
Tokenomics is a broad topic and is still in its infancy because of the rapid developments in Web3 and blockchain industry. We have established the following 4-step approach to design better Tokenomics for any blockchain venture:
Let us look at what goes inside each of the above steps:
The process for good Tokenomics strategy starts with identification of the token requirements for the business. The business model is documented and the core activities which add value to the business in terms of financial and non-financial measures are identified. The main objective of this step is to identify the need to launch a token for the business being studied.
In this section, we identify the best possible use cases for the token. Use-cases vary from project-to-project and our methodology is focused on identifying the use-cases which will add value to the overall business model. Our aim here is to come up with practical and valuable use-cases instead of merely launching a token. This step results in designing the token-to-market fit for the project.
After having performed a requirement analysis and identifying the token-to-market fit, token design needs to be finalized. This stage focuses on deciding upon the type of token (utility, governance or security), what will be the total supply of the token, what will be the monetary policy (inflationary or deflationary), how the supply will be distributed amongst different stakeholders etc.
There have been several successful token-launches by blockchain-based businesses during the last few years. One of the mainstream token launches was executed by Crypto.com for its CRO token.
The company was founded in 2016 as “Monaco” but changed its name later in 2018 after acquiring the Crypto.com domain name. It operates as one of the largest centralized exchanges in the world. Initially, the company started with an exchange and crypto.com blockchain but later added Cronos (an EVM (Ethereum Virtual Machine) compatible sidechain) as well. CRO token was launched in November 2018 as the utility and governance token with a total supply of 30 billion. As of 9 February 2022, 25 billion CRO tokens are in circulation. The token distribution for CRO is as follows:
CRO token has multiple use cases as listed below:
It can be observed from the above case study that Crypto.com launched their token after almost two years of being operational. They launched the token once they built their user-base and grew their infrastructure. This solidifies the concept and importance of use-cases for crypto tokens.
Now that we have learnt a lot about crypto tokens and Tokenomics, it is clear why tokens are important for blockchain based businesses and why there is a need for effective Tokenomics strategy. With a rapid transformation of technology and newer types of micro-economies being introduced by blockchain businesses, crypto tokens are at the center of this revolution. The most important factor to be considered while designing a Tokenomics strategy is to identify the use-case of crypto token. Once a use-case has been identified and fits into the overall strategy of a business, it can be launched to boost the value proposition for its customers/users.