📅The Fair Price Model

Understanding Tokenomics: Supply, Demand, and Valuation

Token Supply: Inflation vs. Deflation

99% of tokens are inflationary, meaning their circulating supply increases annually. This can happen through various mechanisms:

• Fixed Supply with Inflation: A predetermined amount of tokens are released gradually with a built-in inflation rate.

• Inflationary Supply: New tokens are constantly minted without a fixed limit, potentially leading to dilution.

• Fixed Supply with Deflation: Tokens are burned periodically, reducing the total supply and increasing scarcity.

• Burn and Mint: A combined approach where tokens are both burned and minted based on specific events or protocols.

Analyzing the annual inflation rate is crucial to understand the potential impact on token value.

Deflationary projects, like $BNB and $ETH, burn tokens to control inflation, making them attractive from a supply-control perspective.

Demand Metrics: Gauging Token Value

Understanding token demand is equally important for evaluation. Key metrics to track include:

• Token Trading Volume: Stable metric for all tokens, monitor across different timeframes (30D, 90D, 180D, 365D).

• Total Value Locked (TVL): Applicable to L1s/L2s/DeFi, track TVL growth on chosen timeframes.

• Fees/Revenue: Variable metric for L1s/L2s/DeFi/Middleware services, track fees or revenue growth across timeframes.

• Token Holders Growth: Stable metric for all tokens, monitor the growth of unique token holders across timeframes.

• Staking Marketcap: Variable metric for L1s/L2s/DeFi/Middleware services, track the growth of staked token market cap across timeframes.

• Daily Active Users (DAUs): Variable metric for L1s/L2s/DeFi/Middleware services/Games, track the growth of DAUs across timeframes.

Valuation Model: Estimating Fair Price

The Fair Price Model helps estimate the intrinsic value of a token based on supply and demand dynamics:

Remember: The Fair Price Model is an experimental data model that will require more demand-side data metrics, real-time data feeds, and continuous improvements to enhance the accuracy of the results.

You should not make any financial decisions based solely on the fair price displayed on our dashboards.