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How the Tokenomics can guide your investment process more than the Whitepaper?

Cryptocurrency Projects fail for different reasons from fraud founders to poor marketing, and more often than not, poor token economics (Usually to save a few bucks trying to DIY but put the project at risk, Fair deal I suppose?)

Mistakes that I’ve seen while Auditing Tokenomics –

1️⃣ Poor Vesting Schedules: Too Fast or Too Slow, The balance is your friend because a bad vesting schedule leads to uncontrollable sell pressure or a liquidity crunch

 

🚨 Too fast = Early investors & team members dump tokens immediately, crashing the price.

 

🚨 Too slow = Market lacks liquidity, scaring off new investors.

 

2️⃣ High Token Prices at Launch + no Market-Making Funds is a recipe for selling pressure, snipers, and poor liquidity. Many projects overprice their tokens during launch but fail to allocate funds for market-making.

 

🚨 No liquidity = No price stability. Even if demand exists, without liquidity, price fluctuations become extreme.

 

3️⃣ No Real Incentives for Users to Stay 🎯, You’re Marketing gimmicks and KOL hype can only attract users temporarily. But if there’s no reason to keep using the token, demand dies quickly.

 

🚨 Example: Many casino tokens fail because they don’t gamify the experience even though the whole point of a casino is gamification like that is your underlying business (Casino = Gamification) Whereas Rollbit succeeded because users buy the token to engage with the platform.

 

4️⃣ Lack of Usability: “A Token Without Purpose has no lifecycle” — If your token has no real function, it’s like handing out free coupons for a trip to Venus -exciting, but worthless (96.5% Carbon dioxide, as bad as 90% Token holding by the founder in 20 different wallets with cool names)

 

🚨 Example: Projects that create native tokens without any use case beyond trading often fade into irrelevance.

 

5️⃣ Team Holding More Than 20% Without a Clear Roadmap

 

🚨 Over-concentrated supply in the hands of the team or investors raises red flags. If there’s no vesting schedule or transparency, it signals a potential exit scam. You’ll see the “We were hacked” Tweet soon after they rug you!

 

Tokenomics = Long-Term Success

 

Tokenomics isn’t just about supply mechanics — it’s about building a sustainable ecosystem. If the crypto project lacks liquidity, incentives, usability, or proper vesting, failure is inevitable.