Novice popular science post: What is token economics?

In-depth interpretation of the economics of tokens of Web3 project: Taking Roam as an example

A successful Web3 project cannot be separated from a carefully designed token economic model, which not only concerns the long-term sustainable development of the project, but also directly affects users' investment decisions. This article will explore the analytical framework of token economics in depth and conduct a specific analysis using the Roam project as an example.

The evaluation of the token economic model can be carried out from four key dimensions: token supply (supply side), token utility (demand side), token distribution (holder situation), and token governance (long-term ecology).

1. Token supply: control supply and stabilize value

To evaluate the supply of tokens, we need to pay attention to four core indicators:

• Maximum supply: Preset upper limit of total tokens.
• Flow volume: The number of tokens currently circulating in the market is affected by the team and investors' unblocking plan and ecological incentives.
• Current market value: Current price multiplied by circulation.
• Full dilute market value: Current price multiplied by the maximum supply to assess potential price risks. A highly valued project may have a complete dilution market value that is far beyond the industry benchmark and is difficult to maintain in the long run.

The impact of token destruction mechanism on supply is crucial: the destruction mechanism leads to deflation, and vice versa, inflation.

The total supply of Roam project is 1 billion (1B) $ROAM tokens, including:

• 120 million (120M) were allocated to the team and distributed within six years, reflecting the team's long-term development intention.
• 280 million (280M) are allocated to early and future investors (including airdrops), forming the initial circulation.
• The remaining 600 million (600M) are generated through mining to ensure continuous project participation and avoid "shortcoming".

The project party plans to repurchase tokens through business revenue, showing an overall deflation trend and enhancing token value support.

2. Token utility: empower tokens and create demand

Token utility determines the value and attractiveness of tokens, and can be divided into three aspects:

• Practicality: For example, Ethereum is a Gas fee payment tool and Bitcoin is a real-world payment method.
• Value accumulation: For example, obtaining income through pledge, or participating in governance voting.
• Meme and Narrative: Values ​​based on Internet pop culture or concepts, such as Dogecoin.

Roam tokens are mainly used for their ecosystem services, including paying for network service fees, redeeming data or participating in other functions, and have practical application value, rather than simply "air coins".

3. Token distribution: Focus on fairness and concentration

There are two main ways to issue tokens:

• Fairly launch: For example, Bitcoin, without pre-allocation.
• Pre-mining and launching: For example, Ethereum, pre-allocated to teams or investors.

Roam adopts pre-mining model, which conforms to VC investment logic. Pay attention to the type of token holders and allocation ratio: centralized holdings in large institutions may bring risks; while the majority of tokens held by founding teams and long-term investors are more conducive to long-term development. The Web3 industry standard is to allocate at least 50% of the tokens to the community to dilute control of teams and investors. In addition, lock-in and release plans are also crucial to avoid a large number of tokens entering the market causing price declines.

4. Token governance: inspire participation and promote win-win results

The token governance mechanism is designed to inspire participants and ensure the long-term sustainable development of the project. The pledge mechanism is a common method, and its value improvement is reflected in:

• Lock in tokens to obtain passive income and set the minimum value of the token.
• Reduce market supply and increase token price.

Roam also provides pledge services, reducing the selling pressure after going online.

Summary: Analysis of Roam Token Economic Model

Roam's token economic model is designed reasonably, follows the principles of long-termism and is sustainable. Its success lies in: controlling supply, increasing demand and supplementing it with an effective governance mechanism.

An ideal token economic model should have:

• Reasonable pledge mechanism (such as Curve's VE model).
• Rich application scenarios.
• Steady growing business revenue (avoiding reliance on Ponzi model).

The token economic model is important, but the ultimate value still depends on the business value of the project itself. At present, the token economic model is still developing and changing, and we need to continue to pay attention to the emergence of new models. But the core analytical framework—supply, demand, distribution, governance—is still applicable.

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