Tokenomics // Lesson 01

Supply & Scarcity

Definition: Hard-Capped Assets

Unlike fiat currencies, which can be printed indefinitely, institutional tokenomics models utilize a "Hard Cap"—a fixed maximum supply of tokens that can ever exist. This creates absolute digital scarcity.

How it Works: Deflationary Logic

A deflationary model goes beyond a fixed supply by actively removing tokens from circulation. This is typically achieved through "Buy-and-Burn" events, where protocol revenue is used to purchase tokens on the open market and permanently destroy them.

"Scarcity is the fundamental requirement for any store of value. Institutional tokenomics encodes this scarcity into the protocol's mathematical foundation."

Knowledge Checkpoint

1. What is a "Hard Cap" in tokenomics?

A limit on how many people can use the app A fixed maximum supply of tokens that can ever exist The price ceiling for a property

2. How does a "Buy-and-Burn" mechanic typically affect the token supply?

It permanently reduces the circulating supply It increases the supply by minting new tokens It has no effect on the supply

3. Why is scarcity considered a requirement for a store of value?

It makes the tokens harder to find It ensures that the asset cannot be devalued through over-issuance It is a traditional requirement for all physical objects