# Tokenomics By [Quang Phan](https://paragraph.com/@quang-phan) · 2022-02-25 --- **Tokenomics is one of the most popular terms when it comes to crypto investment, but not everyone understands it thoroughly. Evaluating Tokenomics efficiently is a MUST HAVE skill in the crypto market.** **Here’s a recap created from this original article:** [**https://coin98.net/what-is-tokenomics**](https://coin98.net/what-is-tokenomics) [https://coin98.net/what-is-tokenomics](https://coin98.net/what-is-tokenomics) The word Tokenomics is combined by “Token” and “Economics”, which means “the economics of tokens”. Simply put, it is how tokens are applied in the economy of a project.  Tokenomics consists of various elements:  * Token Allocation * Token Sales * Token Use Cases * etc ![An example of a token](https://storage.googleapis.com/papyrus_images/c8d6fc2bf2c24354535dd30e29acc88b4a475cb3498b05d1a82f25234bf6008f.png) An example of a token Why is Tokenomics so important? Because it is the tool for Market Makers to control the “crypto game”.  Crypto is a ZERO-SUM game, which means that the profit someone earns is the loss of another. There is no capital redundancy.  In the “crypto game”, you are a player alongside Developers, Market Makers, and Venture Capitals.  However, you are only a player, and they are the game creators who can control the game at will just by using a simple tool.  That tool is Tokenomics. Now do you want to take advantage of that tool to win with them, or decide to be completely in the dark and lose money? If you would love to win in this game, let’s continue and go through some notable points of Tokenomics. First, let’s take a look at Token Allocation. * How many tokens does the team have? * How many tokens do early investors have? * How many tokens are distributed to the community? Understanding how tokens are distributed can help you open a better position. ![Examples of token allocation](https://storage.googleapis.com/papyrus_images/e91cda64b8ac998aa7abe7a63373e3f72fafe99c59a9b3b01e83182040911dc2.png) Examples of token allocation Second, look over the Token Release to see when and how many tokens are released onto the market.  A complete Token Release schedule should not be too short (i.e. under 1 year) or too long (i.e. over 10 years) as it reduces the team’s motivation to grow. 3-5 years is perfect. It also shows whether you should buy or sell a token at a time.  If a massive number of tokens will be released soon, you should wait for a while as the token release will create a high sell pressure, leading to the decline of the token’s price. Third, pay attention to the Token Sale.  * How many funding rounds are there? * How many tokens have been sold? At what prices? * Who bought the tokens? Answering these questions will help you evaluate your current position if you want to buy any token.  ![](https://storage.googleapis.com/papyrus_images/580267c533eb23c56c6194d5b8aa568b212146b112e90e1813a7db88f729b615.jpg) Knowing who participated in token sales is also imperative. If the project was invested in by major Venture Capitals, it will be supported and its tokens are likely to grow along.  On the contrary, if the project was invested in by only unknown Capitals, it is not as great. Lastly, carefully notice the Token Use Case. How are the tokens used? What are they used for? Why do we need to buy them? If there is no buy demand, there is no price growth, and there is no investment opportunity. A potential token is cleverly applied in a variety of ways, therefore, it is an indispensable part of the project.  The common use cases of a token can be listed as Staking, Farming, Governance, Transaction Fee,...\*\* \*\* ![Different use cases of a token](https://storage.googleapis.com/papyrus_images/e95ccee1b0f8bc2fd49844336bb5342e6320a7f356976e4be3bdb6e46e446b6e.png) Different use cases of a token A perfect example is CAKE. CAKE was designed to be applied in every feature of Pancakeswap, including the Syrup Pool, IFO, Lottery and Prediction.  The result? The price of CAKE rose from $0.4 to an ATH of $40 (+10,000%) earlier this year, and now remains at $18 (+4,500%). ![](https://storage.googleapis.com/papyrus_images/4d57119cf4f3764e675bfc267fd33b3dc4d1e3837df791b87fc0841bcd514426.png) There you have it, a comprehensive overview of Tokenomics. I hope it has helped you learn something useful. Again, you can read the original article I wrote on Coin98 here: [https://coin98.net/what-is-tokenomics](https://coin98.net/what-is-tokenomics) --- *Originally published on [Quang Phan](https://paragraph.com/@quang-phan/tokenomics)*