Key Takeaways
1
Supply-side tokenomics (emission schedule, vesting cliffs) determines how tokens enter circulation. Demand-side (fee burns, utility sinks, staking lockups) determines how they leave. Both sides must balance.
2
EIP-1559 transformed Ethereum's token economics by burning a base fee with every transaction — converting ETH from inflationary to deflationary during high-usage periods. A live case study in demand-side design.
3
Token economy financial modelling requires five components: supply schedule, vesting unlocks, treasury runway, fee revenue projections, and token velocity. All five must be stress-tested under bear scenarios.
Glossary
Vesting Schedule
Timeline over which allocated tokens become transferable; cliff = initial lock period; linear = gradual release thereafter. Cliff design directly affects post-launch sell pressure.
Burn Mechanism
Permanent removal of tokens from circulation, typically funded by protocol fees; reduces supply and increases scarcity if demand is sustained or growing.
Treasury Runway
Number of months a protocol can fund operations at current spend rate from treasury holdings; a critical solvency metric independent of token price.