Tokenomics and Distribution

🪙 Token Standards: Tokenomics & Distribution

The Birthday Cake Analogy 🎂

Imagine you baked a giant birthday cake for your entire neighborhood. Now you need to decide:

• How many slices to make?
• Who gets a slice first?
• Who has to wait for their slice?
• Should you give free slices to attract more friends?

That’s exactly what tokenomics is! Your cake = your token. The slicing rules = tokenomics.

🧩 What is Tokenomics?

Tokenomics = Token + Economics

It’s the rulebook that decides:

1. How many tokens exist (total supply)
2. Who gets tokens (distribution)
3. When they get them (vesting)
4. Why the token has value (utility)

Why Does This Matter?

Think of it like this:

If everyone gets unlimited free cake, nobody wants to buy it. If only 10 slices exist for 1000 people, everyone fights for it!

Good tokenomics = Balanced supply & demand = Token keeps its value ✨

📊 Tokenomics Fundamentals

The 5 Magic Numbers

Every token project has these key numbers:

Simple Example: Bitcoin vs Ethereum

Bitcoin (BTC):
├── Max Supply: 21 million (FOREVER)
├── New coins: Halves every 4 years
└── Result: Deflationary (more scarce over time)

Ethereum (ETH):
├── Max Supply: Unlimited
├── New coins: Created by staking
├── Burned coins: Some ETH destroyed per transaction
└── Result: Can be deflationary or inflationary

Why Fixed Supply Matters

Question: What happens if a game keeps printing unlimited coins?

Answer: Each coin becomes worthless! (Like Venezuela’s money crisis)

🎯 Key Insight: Scarcity creates value. Good projects limit supply.

🥧 Token Distribution

Cutting the Cake Fairly

When a project launches, they decide WHO gets tokens and HOW MUCH.

graph TD
    A["Total Token Supply<br/>100%"] --> B["Team & Founders<br/>15-20%"]
    A --> C["Investors & VCs<br/>15-25%"]
    A --> D["Community & Public<br/>30-50%"]
    A --> E["Treasury & Development<br/>10-20%"]
    A --> F["Ecosystem & Rewards<br/>10-20%"]

Real-World Distribution Example

Let’s say CookieToken has 1,000,000 total tokens:

🚨 Red Flags in Distribution

Watch out for these warning signs:

🎯 Golden Rule: A healthy project gives the COMMUNITY the biggest slice!

⏰ Vesting Schedules

The “Wait Your Turn” Rule

Vesting = Tokens are locked and release slowly over time.

Think of it like this:

You won a prize of 12 ice creams 🍦 But you can only eat 1 per month for a year! That’s vesting!

Why Vesting Exists

Without vesting:

1. Team gets all tokens at launch
2. Team sells everything immediately
3. Price crashes to zero
4. Everyone else loses money 😭

With vesting:

1. Team tokens unlock slowly
2. They can’t sell everything at once
3. They’re motivated to build for years
4. Everyone wins! 🎉

Common Vesting Terms

Vesting Schedule Example

Team Token Vesting:
├── Month 0 (TGE): 0% unlocked (cliff starts)
├── Month 6: 0% (still in cliff)
├── Month 12: 25% unlocked (cliff ends!)
├── Month 18: 50% unlocked
├── Month 24: 75% unlocked
└── Month 36: 100% unlocked ✅

graph TD
    A["Day 1: Launch"] --> B["Month 1-12: CLIFF<br/>0 tokens released"]
    B --> C["Month 12: Cliff Ends<br/>25% released!"]
    C --> D["Month 13-36: Linear<br/>Gradual release"]
    D --> E["Month 36: Fully Vested<br/>100% available"]

Reading a Vesting Schedule

When you see: “12-month cliff, 36-month linear vesting”

It means:

1. 0 tokens for the first 12 months
2. After month 12, tokens release evenly over 24 more months
3. Fully unlocked at month 36

🎁 Airdrops

Free Tokens Falling from the Sky!

Airdrop = Free tokens sent to your wallet!

Why do projects give away free money?

graph TD
    A["Project Wants Users"] --> B["Give Free Tokens"]
    B --> C["People Excited!"]
    C --> D["They Tell Friends"]
    D --> E["More Users Join"]
    E --> F["Token Value Grows"]
    F --> G["Everyone Happy! 🎉"]

Types of Airdrops

Famous Airdrop Example: Uniswap (UNI)

In September 2020, Uniswap gave away free UNI tokens:

• Who got it? Anyone who used Uniswap before September 1
• How much? At least 400 UNI per wallet
• Value then: ~$1,200
• Value at peak: ~$16,000! 🤯

This was a retroactive airdrop - rewarding early users for helping the platform grow.

How to Qualify for Airdrops

1. Use new protocols - Be an early adopter
2. Hold popular tokens - ETH, SOL, etc.
3. Join communities - Discord, Twitter
4. Test products - Use testnets
5. Provide liquidity - Add to pools

⚠️ Warning: Never share your private key for an “airdrop” - that’s a SCAM!

🌳 Merkle Airdrops

The Smart Way to Airdrop

Problem: How do you send tokens to 100,000 people without paying $1 million in fees?

Solution: Merkle Airdrops! 🧙‍♂️

What’s a Merkle Tree?

Think of it like a family tree, but for data:

                    ROOT HASH
                   /         \
              Hash AB        Hash CD
              /    \         /    \
          Hash A  Hash B  Hash C  Hash D
            |       |       |       |
          Alice   Bob    Carol   Dave
          100     200     150     300

Every leaf (bottom) = One person’s airdrop info Every branch = Combined proof Top = One single “root” that proves EVERYTHING

How Merkle Airdrops Work

Old Way (Expensive):

1. Project sends 100,000 separate transactions
2. Pays gas fee for EACH one
3. Cost: 💸💸💸💸💸

Merkle Way (Cheap):

1. Project creates one Merkle tree with all recipients
2. Publishes just the ROOT hash on blockchain
3. Users CLAIM their own tokens
4. They provide a “proof” (their branch of the tree)
5. Smart contract verifies and sends tokens

graph TD
    A["Project Creates<br/>Merkle Tree"] --> B["Publish Root Hash<br/>One Transaction!"]
    B --> C["User Wants to Claim"]
    C --> D["User Gets Proof<br/>From Website"]
    D --> E["Submit Proof to<br/>Smart Contract"]
    E --> F["Contract Verifies<br/>Proof is Valid"]
    F --> G["Tokens Sent! ✅"]

Why Merkle Proofs Are Magic

Imagine proving you’re on a list of 1 million people:

• Without Merkle: Show all 1 million names 📚📚📚
• With Merkle: Show only ~20 hashes! 📝

The proof size is log₂(n), meaning even 1 million entries only needs ~20 hashes!

Real Example: Claiming a Merkle Airdrop

Your Claim Data:
├── Your Address: 0xABC...123
├── Your Amount: 500 tokens
└── Your Proof: [hash1, hash2, hash3, hash4]

Smart Contract Checks:
1. Combines your data + proof
2. Calculates up to root
3. Matches stored root? ✅ = Send tokens!

Benefits of Merkle Airdrops

🎯 Putting It All Together

Complete Tokenomics Example

Let’s design tokenomics for LearnToken (LRN):

📊 Token Basics:
├── Total Supply: 100,000,000 LRN
├── Initial Price: $0.10
└── Max Supply: 100,000,000 (fixed forever)

🥧 Distribution:
├── Team (15%): 15,000,000 LRN
├── Investors (20%): 20,000,000 LRN
├── Public Sale (25%): 25,000,000 LRN
├── Treasury (20%): 20,000,000 LRN
└── Community Airdrops (20%): 20,000,000 LRN

⏰ Vesting:
├── Team: 12-month cliff, 36-month linear
├── Investors: 6-month cliff, 24-month linear
├── Public: 100% at TGE (no lock)
└── Treasury: Unlocks based on milestones

🎁 Airdrop Strategy:
├── Phase 1: Retroactive (early users)
├── Phase 2: Merkle airdrop (token holders)
└── Phase 3: Task-based (community growth)

🏆 Key Takeaways

1. Tokenomics = Rules for token supply, distribution, and value
2. Good distribution = Community gets the biggest share
3. Vesting = Locks tokens to prevent dumps
4. Airdrops = Free tokens to grow community
5. Merkle airdrops = Efficient way to airdrop to millions

💡 Remember: Before investing in ANY token, always check the tokenomics! It tells you if the project is set up for success or disaster.

📝 Quick Vocabulary

Now you understand how tokens are born, distributed, and given away! You’re ready to evaluate any project’s tokenomics like a pro. 🚀