Tokenomics Fundamentals: W5H Framework for Token Design

We provide a beginner-friendly approach to understanding Tokenomics through a W5H framework - “Why, When, What, Where, Who and How” for token design. This first one of the six-piece series on W5H addresses “Why token”, especially from a crypto-product-market fit perspective.

Following the prior “Why token” discussion, we continue on to the “When, What, Where, Who” questions under the W5H framework for token design, and provide various examples.

Following the “Why, When, What, Where, Who” of token design, we discuss the “How token” of the W5H framework and cover the number of distinct tokens needed, token supply generation and allocation, token supply distribution, as well as building token liquidity.

After prior coverage of the “Why, When, What, Where, Who and How” of token design, we explore the supply-demand and their dynamic equilibrium that close the W5H loop. We introduce token supply-demand regulation mechanisms and illustrate how to analyze a given project using case studies.

Based upon prior discussions of sustainable value creation in crypto economies, this article discusses the allocation and distribution of those values. We focus on how the process enables value accrual to token holders, through both universal and selective distribution mechanisms.

We discuss various TradFi modeling methods for token valuation and their limitations, look at speculative token values and their impact on price, and briefly introduce token engineering as a rigorous modeling methodology for token-based crypto-economic system analysis.