The terms we use when we review a token economy, defined in plain language. No jargon for the sake of it.
A free distribution of tokens to a set of wallets, usually to reward early users or spread ownership. Airdrops can build a community or create instant sell pressure, depending on who receives them and whether they are locked.
How the total token supply is divided between groups: team, investors, treasury, community, and public sale. The allocation table tells you who holds what before a single token trades.
Permanently removing tokens from circulation by sending them to an address no one controls. Burns reduce supply, which can support price if demand holds, but a burn is not a substitute for real demand.
The number of tokens actually available in the market right now. The gap between circulating supply and max supply is future supply waiting to unlock.
A date before which no tokens from an allocation unlock. When a cliff expires, a block of tokens becomes available at once, which can flood the market on a single day.
A decentralized autonomous organization. A structure where token holders vote on decisions instead of a single company. How decentralized a DAO really is depends on who holds the votes and who holds the keys.
The rate at which new or locked tokens enter circulation over time. The emission schedule decides how much fresh supply the market has to absorb, and when.
The market value of a token if every token in the max supply were in circulation at the current price. A low circulating valuation can hide a very large FDV once everything unlocks.
A token that gives holders a vote in a project's decisions, such as treasury spending or protocol changes. Its value depends on how much real power the vote carries.
The rate at which new tokens are created, increasing supply. Some inflation pays for security or rewards. Too much, with no matching demand, dilutes holders and pushes price down.
How easily a token can be bought or sold without moving the price much. Thin liquidity means even a modest sell order can crash the price.
A pool of two assets on a decentralized exchange that traders swap against. The depth of the pool determines how much buying or selling the market can absorb.
A party that provides buy and sell orders to keep a market liquid and orderly. Healthy market making supports stability. Hidden arrangements can also be used to prop up a price artificially.
The total number of tokens that can ever exist. A fixed max supply caps inflation. An uncapped or easily changed supply does not.
A fundraising method where a project sells the right to operate a node on its network. Buyers earn rewards for running the node, and the project raises capital while decentralizing.
A token design that pays existing holders with money from new buyers rather than from real revenue. It works only while new money keeps arriving, and unwinds when it stops.
An adversarial review that attacks a design the way a real opponent would, to find weaknesses before they are exploited. An LFG Red Team attacks a token's economics rather than its code.
The volume of tokens that holders are likely to sell. Unlocks, rewards paid in the token, and short lockups all create sell pressure that the market has to absorb.
A line-by-line review of a project's code to find security bugs before launch. An audit checks whether the code is safe, not whether the token economy is sound.
Locking tokens to support a network or earn rewards. Staking can reduce circulating supply, but if rewards are pure inflation, it can also just delay sell pressure.
The moment a token is created and first becomes available. The TGE sets the initial circulating supply and the starting point for every unlock that follows.
The economic design of a token: supply, demand, incentives, and distribution. Good tokenomics gives people a durable reason to hold. Bad tokenomics pays them to leave.
The pool of tokens or assets a project holds to fund its work. How the treasury is controlled, and how fast it is spent or sold, shapes long-term sell pressure.
A token used to pay for something inside a product or network, such as fees or access. Its value tracks how much the network is actually used.
The gradual release of locked tokens over time. Long, smooth vesting aligns holders with the long term. Short vesting concentrates selling near launch.
The document that lays out a project's design, including its tokenomics. It is the primary source a Red Team review reads, and where most red flags are hiding in plain sight.