Why do we need Tokenomics?

Abstract

Initial Coin Offerings have revolutionised the way that startups are funded. Furthermore, besides their use in an ICO, tokens unlock many possibilities within the context of the artificial economies that are being set up through blockchain: from incentivisation to automatic balancing of the economy. In spite of these developments, there is still no commonly accepted theoretical framework for analysing token economies and ICOs. This presents a unique challenge to the scientific community. A proper theory of token economies would allow us to understand which models work best and are sustainable. This would also help improve the credibility of ICOs as a method of raising money, calming criticism and concerns about speculative bubbles. The science of economics has given us powerful insights into how the laws of real world economies work. What we, as the scientific blockchain community, need to do, is spend more time and resources in understanding how to transfer learnings from traditional economics into token economies and how to create new economic models and theories that exploit the possibilities offered by the blockchain.