agiprolabs/token-economics

Token Economics

Tokenomics — the study of token supply dynamics, distribution, and value accrual — is one of the most important factors in crypto asset analysis. Supply changes directly affect price: new tokens entering circulation create selling pressure, while burns and locks reduce it. Understanding these dynamics lets you estimate dilution risk, identify overvalued or undervalued tokens, and anticipate price-moving unlock events.

Why Tokenomics Matters

Price is a function of demand and supply. In crypto, supply is programmable and constantly changing:

• A token inflating at 50%/year needs 50% demand growth just to maintain price
• A large unlock releasing 10% of circulating supply in one day often causes 5-20% drawdowns
• Tokens with >80% of supply locked have extreme dilution risk ahead
• Protocols that burn fees can become net deflationary, creating structural price support

Key Supply Concepts

Total Supply vs Circulating Supply

total_supply      = maximum tokens that will ever exist (or current total minted)
circulating_supply = tokens currently available for trading
locked_supply     = total_supply - circulating_supply
circulating_pct   = circulating_supply / total_supply * 100

Market Cap vs Fully Diluted Valuation

market_cap = price * circulating_supply
fdv        = price * total_supply
fdv_mcap_ratio = fdv / market_cap

The FDV/MCap ratio measures future dilution risk:

| FDV/MCap | Dilution Risk | Interpretation | |----------|---------------|----------------| | 1.0-1.5 | Low | Most supply already circulating | | 1.5-3.0 | Moderate | Significant supply still locked | | 3.0-5.0 | High | Majority of supply not yet released | | >5.0 | Very High | Token will face massive dilution |

Net Inflation Rate

annual_new_tokens = emissions + vesting_unlocks + rewards
annual_burned     = fee_burns + buyback_burns
net_new_tokens    = annual_new_tokens - annual_burned
net_inflation_rate = net_new_tokens / circulating_supply * 100  # percent per year

Supply Dynamics

Inflationary Pressure (tokens entering circulation)

• Emissions: Block rewards, liquidity mining, staking rewards
• Vesting unlocks: Team, investor, and advisor tokens unlocking on schedule
• Unlock events: Large one-time releases (cliff expirations)
• Treasury spending: DAO or foundation distributing tokens

Deflationary Pressure (tokens leaving circulation)

• Fee burns: Protocol burns a portion of transaction fees (like EIP-1559)
• Buyback and burn: Protocol uses revenue to buy and permanently destroy tokens
• Staking locks: Tokens locked in staking (temporarily removed from circulation)
• Lost tokens: Permanently inaccessible tokens (lost keys, burn addresses)

Selling Pressure Estimation

daily_emissions_usd = daily_new_tokens * token_price
percent_sold = 0.50  # assume 50% of new tokens are sold (conservative)
daily_sell_pressure = daily_emissions_usd * percent_sold
sell_pressure_ratio = daily_sell_pressure / daily_volume
# > 0.05 (5%) = significant selling pressure
# > 0.10 (10%) = heavy selling pressure

Vesting and Unlock Schedules

Key Concepts

• Cliff: Period before any tokens unlock (typically 6-12 months)
• Linear vesting: Constant rate of unlock after cliff (monthly or daily)
• Stepped vesting: Periodic unlocks at set intervals (quarterly)
• TGE unlock: Percentage released at Token Generation Event

Analyzing Unlock Impact

unlock_amount_tokens = 10_000_000
avg_daily_volume_tokens = 5_000_000
unlock_volume_ratio = unlock_amount_tokens / avg_daily_volume_tokens

# Impact assessment:
# < 1x daily volume: minor impact
# 1-5x daily volume: moderate impact, expect 2-5% drawdown
# 5-10x daily volume: major impact, expect 5-15% drawdown
# > 10x daily volume: severe impact, expect 10-30% drawdown

Tracking Sources

• CoinGecko / CoinMarketCap: Basic supply data
• Token Terminal: Revenue and valuation metrics
• Token Unlocks (token.unlocks.app): Detailed unlock schedules
• Project documentation: Whitepapers, tokenomics pages
• On-chain: Vesting contract state, treasury balances

Token Distribution Analysis

Typical Allocation Ranges

| Category | Typical Range | Red Flag | |----------|---------------|----------| | Team/Founders | 15-25% | >30% | | Investors (Seed+Series) | 10-30% | >40% | | Community/Ecosystem | 20-40% | <15% | | Treasury/DAO | 10-20% | <5% | | Public Sale | 5-20% | <2% | | Advisors | 2-5% | >10% |

Distribution Red Flags

• >50% insider allocation (team + investors): Insiders control price
• Short vesting (<1 year): Quick dump risk
• No cliff: Immediate selling from day one
• Large single wallets: Concentration risk (use token-holder-analysis skill)
• Unlabeled large allocations: Hidden insider holdings

Distribution Quality Score

def distribution_score(team_pct: float, investor_pct: float,
                       community_pct: float, cliff_months: int,
                       vesting_months: int) -> str:
    """Rate token distribution quality."""
    score = 0
    insider_pct = team_pct + investor_pct

    if insider_pct < 30: score += 3
    elif insider_pct < 50: score += 1

    if community_pct > 30: score += 2
    elif community_pct > 20: score += 1

    if cliff_months >= 12: score += 2
    elif cliff_months >= 6: score += 1

    if vesting_months >= 36: score += 2
    elif vesting_months >= 24: score += 1

    if score >= 8: return "Excellent"
    if score >= 6: return "Good"
    if score >= 4: return "Moderate"
    return "Poor"

Valuation Frameworks

Revenue-Based Metrics

# Price-to-Earnings (for fee-generating protocols)
pe_ratio = fdv / annualized_net_revenue

# Price-to-Sales
ps_ratio = fdv / annualized_total_volume

# Price-to-Fees
pf_ratio = fdv / annualized_protocol_fees

# Revenue Multiple (adjusted for token value accrual)
rev_multiple = fdv / (annualized_fees * fee_share_to_token_holders)

Typical ranges (crypto, highly variable):

• P/E: 10x-100x+ (DeFi protocols)
• P/S: 0.5x-50x
• P/F: 20x-500x

Network Value Metrics

# Network Value to Transactions (NVT)
nvt = market_cap / daily_transaction_volume_usd
# High NVT (>100): potentially overvalued or store-of-value
# Low NVT (<20): potentially undervalued or high activity

# Market Value to Realized Value (MVRV)
# realized_value = sum of each token at its last-moved price
mvrv = market_cap / realized_value
# MVRV > 3.0: historically overvalued zone
# MVRV < 1.0: historically undervalued zone

Comparable Analysis

def comparable_analysis(target: dict, peers: list[dict]) -> dict:
    """Compare target token metrics against peer group.

    Each dict has: name, fdv, revenue, tvl, users
    Returns premium/discount percentages.
    """
    peer_fdv_rev = [p["fdv"] / p["revenue"] for p in peers if p["revenue"] > 0]
    peer_fdv_tvl = [p["fdv"] / p["tvl"] for p in peers if p["tvl"] > 0]

    avg_fdv_rev = sum(peer_fdv_rev) / len(peer_fdv_rev) if peer_fdv_rev else 0
    avg_fdv_tvl = sum(peer_fdv_tvl) / len(peer_fdv_tvl) if peer_fdv_tvl else 0

    target_fdv_rev = target["fdv"] / target["revenue"] if target["revenue"] > 0 else 0
    target_fdv_tvl = target["fdv"] / target["tvl"] if target["tvl"] > 0 else 0

    return {
        "fdv_rev_premium": (target_fdv_rev / avg_fdv_rev - 1) * 100 if avg_fdv_rev else None,
        "fdv_tvl_premium": (target_fdv_tvl / avg_fdv_tvl - 1) * 100 if avg_fdv_tvl else None,
    }

Token Value Accrual Mechanisms

| Mechanism | Description | Valuation Impact | |-----------|-------------|-----------------| | Fee sharing | Holders receive protocol revenue | Direct cash flow, use DCF | | Governance | Voting rights on protocol | Hard to value, often overpriced | | Utility | Required for protocol use | Demand scales with usage | | Buyback & burn | Protocol buys and burns | Reduces supply, structural bid | | Staking rewards | Yield from staking | Inflationary if from emissions | | veToken model | Lock for boosted rewards + governance | Reduces circulating supply |

PumpFun Token Economics

PumpFun tokens on Solana have simplified tokenomics:

• Fixed supply: 1,000,000,000 tokens (1 billion)
• No vesting: All tokens available immediately at launch
• No team allocation: 100% available on bonding curve
• Bonding curve pricing: Price determined by curve math, not supply changes
• Post-graduation: After bonding curve completes, supply is fully liquid on Raydium
• No inflation: No emissions, no staking rewards, no additional minting

Analysis focus for PumpFun tokens shifts from supply dynamics to:

• Holder concentration (use token-holder-analysis)
• Volume sustainability
• Liquidity depth (use liquidity-analysis)
• Dev wallet behavior

Integration with Other Skills

| Skill | Integration | |-------|-------------| | defillama-api | Fetch TVL, revenue, fees for valuation metrics | | token-holder-analysis | Analyze holder concentration and whale behavior | | coingecko-api | Fetch supply data, market cap, FDV | | liquidity-analysis | Assess trading liquidity relative to supply | | risk-management | Supply dilution as risk factor | | position-sizing | Adjust size for dilution risk |

Files

References

• references/supply_analysis.md — Circulating supply tracking, inflation modeling, unlock analysis, burn mechanics
• references/valuation_frameworks.md — Revenue-based valuation, NVT, MVRV, comparable analysis, value accrual

Scripts

• scripts/tokenomics_analyzer.py — Fetch and analyze token supply metrics from CoinGecko, calculate dilution risk and basic valuations
• scripts/supply_modeler.py — Project token supply over 12 months given emission and burn parameters, scenario analysis