The following is a guest post and opinion of Arthur Iinuma, Principal consultant and Founder of Iinuma.io.
While good tokenomics cannot save unsound projects, even the most promising network launches can fail from poor token design.
The biggest tokenomics mistakes I see in otherwise solid projects are:
While it is customary for projects to offer early investors lower priced tokens compared to later rounds, founders should be careful in allowing wide pricing spreads between these early rounds and public buyers. This may be easier said than done as shrewd investors demand lower prices against the threat of withholding investment.
However, an investor with a low entry price in comparison to a later round essentially guarantees their upside even at prices lower than the cost basis of a public buyer. This means that a loss for buyers in later rounds may still result in gains for the earliest token holders – creating an unfair imbalance in the project’s token economy.
Far too many projects turn their public buyers into exit liquidity for early investors and insiders. Nothing destroys community faster than watching early insiders dump tokens while public buyers hold withering bags.
Sometimes the prospect of turning recently minted digital tokens into real value is too tempting for the founders that created them. I’ve watched projects go from great ideas to publicly traded at over a billion USD in valuation, minting multi-millionaire founders in the process. Even the most disciplined of them are tempted to sell their holdings and trade their project tokens for cash.
But overvalued project listings create a lot of “air” underneath them, and when everyone is in the money, it’s almost a guaranteed race to the bottom and token holders are quick to cash out to get more favorable pricing than the person next to them. A high starting valuation also means the prospect of public buyers earning a multiple on their investment is slimmer, thinning out secondary market demand. When you have a lot of holders selling and nobody to buy, the result is an eventual death spiral.
BTC and ETH hold the top market cap positions for good reason. Beyond being early, they’ve demonstrated several core principles that separate sustainable token models from hollow speculation vehicles.
Bitcoin’s 21 million fixed supply cap isn’t powerful just because it’s scarce—it’s powerful because the market believes with absolute certainty that this limit won’t change.
The fundamental question every project should answer honestly: Could your product function without a token? If yes, you’re likely forcing tokenization where it doesn’t belong.
Projects should structure valuations across each sale round with reduced spread and design a lockup schedule that prevents lower-priced buyers from “dumping” their tokens on participants in later rounds. Creating a layered vesting schedule that restricts early sales for buyers with a low entry point while allowing for later-round participants to de-risk first offers a reasonable balance of upside for early buyers and price protection for later buyers.
Well-structured token economics goes beyond what is written in a document. Projects should take a step further and ensure their tokens are custodied by a third-party audited, irrevocable smart contract guaranteeing transparency and compliance by all parties.
Lower initial valuations might feel like leaving money on the table, but they create room for meaningful appreciation. Projects launching at already-inflated valuations leave little upside for new participants, killing momentum and community growth.
A low total supply allows for better price control and market responsiveness. It imbues tokens with more significance, making manipulation more difficult and price movements more meaningful.
Good tokenomics isn’t set-and-forget—it requires ongoing stewardship. Here are some best practices:
The most successful projects approach tokenomics as an extension of product design rather than exclusively an exercise of financial engineering.
Thoughtful tokenomics are a signal to the market of a thoughtful product and team. Your token is ultimately your best marketing tool—it rewards loyalty and financially aligns users.
