There are thousands of different cryptocurrencies, Bitcoin being just one of those. This article is intended to explain why so many exist and what sort of characteristics different cryptos might display.

Tokenomics, derived from the words 'token' and 'economics,' is the study of the supply, demand, distribution, and valuation of cryptocurrencies.

A general tokenomics model has three primary pillars: utility, economic security, and value. A successful crypto token must offer utility within its ecosystem, possess inherent value, and ensure economic stability.

Supply In the initial startup stages, crypto tokens are often generated through 'mining' as described in basics of cryptocurrencies. Also, initially, a limited number of coins may have been 'minted' into circulation, called the ‘circulated supply.’ Subsequently, the network can introduce additional coins into the market, depending on the token type. Tokens with a fixed upper supply are usually referred to as deflationary, the best example being Bitcoin, with it's maximum upper limit of 21 million that could ever exist.

Explain it like im 5 : The more of something that exists, the less valuable it becomes. Gold is valuable because it is rare and the same idea extends to Cryptocurrency. Tokenomics helps to decide how many tokens to create and how often to produce more.

Burning and Reducing Supply

Token burning means removing coins from the overall supply of a cryptocurrency and is the opposite of 'mining' or 'minting'. This typically involves sending the coins or tokens to a wallet with no known private keys. This wallet can only receive assets, thus effectively making them inaccessible.

Explain it like im 5 : If we were to destroy half the gold in the world, it would make the other remaining half much more valuable.