Tokenomics: How to Find Good Altcoins or Checkbox for 100x Part 1

Ok you have found a promising #altcoin, a #cryptocurrency that makes your dreams wet!

You close your eyes each night and see 100X. Time passes by and those 100x not only don't come but your portfolio gets smaller. "What happened there?" you wonder. I'll tell you what might have happened there, bad tokenomics, and inflation is one part of that (check more on inflation in the previous post). So pay close attention to what follows.

I'll make it quick for you, here is the Tokenomics Checkbox for 100x you need to know about:

• Supply and Market Cap

• Allocation and Distribution

• Vesting and Inflation

• Utility of a Token

I'm going to explain briefly and simply each section.

Supply and Market Cap

What should we look here for and why? We need information about max supply, circulating supply and market capitalization of a coin/token ( check previous posts for market cap and inflation here and here ).

Firstly we check the proportion between max supply and circulating, best case scenario almost all the coins that will ever be created are already out circulating and worst case scenario we should be ok with is 50% of max supply circulating. If there is less then 50% circulating we need to make supply emission calculations to find out the inflation rate, all this info is required so we know the potential sell pressure on the market (people selling a coin and price going down).

Secondly we need to pay attention to the market cap of a coin rather then the dollar value of it. This is important because you need less money to make the price of a token grow when the market cap is low compared to a large market cap. For example, for #Bitcoin to grow by 10% in dollar value you need someone to buy 6 billions in dollar value worth of Bitcoin, compare that to 130 millions needed for #Yearn.Finance No70 on Coingecko (which has similar value per coin with Bitcoin 36,200$ but difference here is that we have 36,666 max supply and 35,638 circulating).

Easy as pie right? Don't worry with time it will get better :)

Next...

Allocation and Distribution

Here is important to understand the difference between a coin and a token. Coins are native currencies to their own blockchains (eg. #BTC #ETH) and they are used to pay fees, transfer value and pay mining rewards to "miners" (more here). Tokens on the other hand do not have their own blockchain and can exist on multiple blockchains (eg. #BBANK exists on ethereum blockchain and binance smart chain), also usually especially in #DEFI tokens are all premined for 100% or in other words they are all generated into existence ( yet not all coins like #eth or #btc have been created and still being mined).

Continuing on to the fun stuff, or not. Here we gonna talk about mostly tokens that were premined for 100% before the network opened (to understand the difference just think of #Bitcoin that had a "fair launch", meaning that from the beginning of the network people just started mining it to create bitcoin into existence). In the case of tokens the team behind it usually creates/mines the majority or all the tokens into existence and then allocates and distributes them according to their goals and vision. Exactly here is when you start wondering and an alarm starts ringing inside you!!! What if the team keeps majority to themselves and insiders can sell whenever they like? Isn't this bad? That will affect the growth of the project and trust in it, not to mention will drop the price significantly!!! When there is smoke they say, there is fire! What do we pay attention in this section of tokenomics then?

First thing you need to do is to find the tokenomics info on the website of the project you are interested in or if the project is not yet live go to their telegram channel and ask the team to provide it.

Then examine the percentages of max supply allocated to the team, advisors, seed investors, private investors and public investors, all together it shouldn't be more then 50% (which is on the high end) but generally the tokens that go to the community should be more then the tokens remaining to the hands of the team and insiders. Then you will notice some percentages allocating to liquidity, foundation, marketing, ecosystem etc.

Secondly and the most important thing to do is to verify the info above. How? For example if we are talking about a token on ethereum blockchain (erc20), go to its native block explorer etherscan (any blockchain has a block explorer), find the token you are interested in (meaning type the contract address for that token) and there you will find top holders by % of that token, so if the team says that 15% of max supply is allocated to them you should be able to verify and find a wallet ( on etherscan ) that has 15% of tokens in it, also it is better if it's not just a wallet but a smart contract (will explain more in the vesting part).

Be aware that in case of projects that are not live yet all the tokens might be in a single wallet, (not distributed yet) so the info is more relevant after the project is live.

TIP1: If you can't easily find those info for a project it usually might mean it was done on purpose to hide the unfair allocation and distribution.

TIP2: If there is a single wallet (not a smart contract) owning a significant amount of a token or a coin run for the hills!!!

Conclusion

That's already enough to absorb my fellow readers so let's take a break for a cigar, or a coke, or netflix and chill moment because the continuation on tokenomics is equally important and we need that focus to stay strong !!!

Those bad habits of mine, don't follow me kids just 10 push-ups and click further, but if you want to ask me any question then do follow me on Twitter and send me a DM with any question...

Click here to continue to Tokenomics Part2 (coming soon)