Tokenomics or the Token economy is a new concept closely linked to the Tokenization of things and Blockchain technology, with which it is intended to radically change the economic system worldwide. Currently, this concept is gaining momentum, and it is that the token economy resurfaces after the emergence of Blockchain technology, which represents a fact that opens up new and unexplored possibilities for economic development.

What is a Token?

Also called an electronic key or digital key, a Token is a tool used to access a resource that is electronically restricted. This Token is used as a complement or instead of a password, it is a kind of “electronic key” that gives access to something. From a technical point of view, with a focus on the world of cryptocurrencies, it is a programmable monetary unit anchored to a chain of blocks or Blockchain. It is convenient to clarify that a Token has the flexibility to represent anything tangible or not in the real and virtual world. A Token also represents money, like a casino chip, and at the same time, it can represent a gold ingot or a barrel of oil, or the entrance to a club.

What is Tokenization?

Tokenization is a tool used to avoid the duplication of information from a holder in person, online, or digitally. The reality is that anything of value that surrounds us can be converted into a Token, this is what is called Tokenization, and due to this characteristic and the presence of Blockchain technology on the network (which became popular with Bitcoin), there is a strong trend towards the proliferation of cryptocurrencies globally.

What does Tokenomics mean?

As said before, Tokenomics is the economy of Tokens, it is like a derivation or adaptation of the monetary science that traditional banks apply to produce fiat money and the governance rules that govern the use of the money in question. So Tokenomics is part of the economic sciences that study aspects related to the economy of Tokens (or tokens) within the world of cryptocurrencies, which includes, creation, administration, and elimination of Tokens within the network. What Tokenomics essentially do is take the same principle that central banks employ to produce money within their monetary policy, and apply it to the production of Tokens on the Blockchain technology network.

Tokenomics and its role in the DeFi world

Many projects are developed every day in the world of DeFi or decentralized finance that apply to the principles of Tokenomics. These decentralized financing protocols are constantly changing and evolving to adapt to the changing conditions of the ecosystem. So, given the possibility that both physical and virtual objects have to be tokenized, for example, a book, a song, a cryptocurrency, a web address, etc. decentralized developments or DeFi, make use of this facility to crystallize their projects and make them come true. That is to say, the true power of the Token economy is that it allows transferring any value from the real world to the virtual world. And something more important is that the Token or Tokenomics economy allows the realization of all this control in a decentralized way.

What do you think about this topic? Did you know the meaning of the term tokenomics?

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