What is tokenomics?

Tokenomics: Original photo by Clint Adair on Unsplash

Tokenomics: The science of the token economy that observes everything from minting to management and beyond

In the study of blockchain protocols and design, tokenomics considers the economics of a token within one (or more) ecosystem, including token distribution and how tokens can incentivize people within a micro-economy.

Breaking this down: There’s fiat money (backed by nothing) printed by the central banks, who allegedly work alongside governments, to define monetary policy. Then there’s cryptocurrency.

Cryptocurrency has changed the very concept of monetary policy, whereby in this new age of financial freedom, we can create our own micro-economies. Tokenomics is essentially a new monetary policy for the blockchain. And there’s not a bank in sight.

Why tokenomics are a good idea

The concept is not new as it dates back to the 1970s. Free-thinking philosophers and economists have been considering alternatives to our broken economic system for years. The idea that using tokens within a micro-economy could inspire or incentivize a response or behavior is rather an interesting one, after all.

The distribution of tokens

For a project to work, members of the network must hold tokens or coins. Token distribution is done in several ways, including straightforward awarding or rewarding. The idea being that these minted tokens hold a more stable value are they are not just swapped, sold, or stored on an exchange.

Tokenomics is essentially a new monetary policy for the blockchain.

And there’s not a bank in sight.

They have an actual purpose within the project ecosystem — a specific design linked directly to the project. Understanding this is also the key to unlocking the magic behind our model because Studyum’s Stud Token differentiates itself in the same way.

Studyum Token distribution

To explain the concept mentioned above, let’s use the real-life example of the Studyum ecosystem. The Studyum project is a shift from conventional learning to streamlined, on-demand learning online.

Instead of enrolling in a single university and using separate modules, students access a wide range of subjects and teaching styles, thus co-creating a decentralized learning community. New and existing Studyum users receive a wallet for their Studyum smart contract utility token (‘Stud’). New users receive a small number of tokens as an opening balance and then use their wallets for incoming and outcoming transactions.

To drive demand, Studyum needs content. So a percentage of tokens are set aside to attract and fund initial educational contributors.

Contributing educators get rewards, and these rewards give immediate value and incentive to hold Stud Tokens for appreciation over time. Educators can upload 2D or 3D content and create unique NFT collectible cards available for students to buy, trade, or swap within the same community ecosystem.

NFT Rewards for Studying and education

Studyum educators will create and trade personalized photo-holographic NFT collectible cards. Meanwhile, students and educators win rewards via gamification. Here, long-term adoption and retention of the Stud Token are naturally encouraged. Pardon the pun, but with the latter in mind, we’re coining the phrase ‘STUDLing.’

Students will also receive NFTs for learning — managing and trading via this decentralized NFTfi marketplace. Here, they can swap, stake, and trade.

So you can see by this example: Following the principles of tokenomics, the Studyum model encourages people to remain invested in their education, continuing to expand their knowledge throughout life. Besides security and data storage, the purpose of utilizing decentralized ledger and token technology is immutable proof of accomplishment of courses and earning certificates. Students can provide proof of qualified education (Proof of Knowledge) to third parties such as employers and institutions.

In this way, just as Ripple’s XRP is the token face of the payment solutions company, Stud Tokens are tokenized rewards for education across institutions, corporations, and governments.

Governing the ecosystem

Every system needs rules to which its components abide. All such token systems have laws that clearly define how minting, injection, burning, reserves, etc., are managed. Studyum is no exception in this regard, and the token model specifics are in Section 4 of this White Paper.

Suffice to say that, just like many other network creators, we do not aspire to remain the governors of the Stud Token ecosystem. After all, this is a decentralized network. With this in mind, as the Studyum community grows, the tokenomics will evolve to suit its members. Consensus will play a part in the development of the ecosystem and its micro-economy.

Embracing tokenomics

Despite the current evolution of tokenomics into what is most certainly the inevitable future of in-system/in-app economies, the word still has very little recognition. Even the spell-checker I’m using to write this article refuses to acknowledge ‘tokenomics.’ I wonder why that is…

Could this concept be so revolutionary that those controlling our societal system are working hard to keep it a secret behind the scenes?

Why is tokenomics important?

Micro-economies are a welcome and wonderful bi-product of blockchain technology. This evolution in economics means that uniqueness will thrive in each ecosystem. There’s no place for a ‘one-size-fits-all’ principle. The same can be said about Studyum’s learning management system, which operates on the premise that because each of us learns differently, the time has come to evolve from a linear education system.

Blockchain introduces a mind-blowing diverse range of opportunities. Tokenomics enables projects to synchronize their tokenization model with the long-term goals of the project. If done correctly, this will result in a stable and scalable project platform.

The future of tokenomics

Who knows? We live in a time of significant change and at the cutting edge of how these systems integrate with blockchain technologies. We’re on the brink of a new age, where humans choose to accept the old systems no longer, seeing the vast and inevitable potential of blockchain and decentralization.

With this certainty in mind, there will be projects that fail and projects that go on to become genuinely scalable and megalithic. The latter will depend entirely on the purpose and expected longevity of the projects’ design.

That is to say: What problem does it fix? Who does it help? How does it change the world for the better?

Written by Martin O'Toole

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