What are NFT Tokenomics? This article tells you why you should know the tokenomics of your project to help increase your chance of success. When you combine NFT tokens and economics, you get Tokenomics. It is the study of the supply and demand characteristics of a crypto orientated project, and basically the overall economics of a specific crypto token. This article talks about Tokenomics regarding Non-Fungible Tokens (NFTs) on the Ethereum blockchain. People who are interested in Tokenomics will be looking at many factors that give value to a crypto project, such as max supply, mint price, incentives, etc. Most of the important factors are discussed in this article. The excellent thing about NFTs is that investors can easily review these important Tokenomics for any project as they are made publicly assessable on block explorers such as Etherscan.
How Investors Track your Project using Etherscan
Creators and investers can check out anyones NFT on Opensea using Etherscan block explorer. Etherscan basically allows the public to analyse transaction details of an NFT. It is important to remember that creators usually program these transaction details using a coding platform called solidity, the act of doing this is creating a smart contract. Etherscan is a tool that simply allows the public to view this contract which contain details such as the total amount of NFTs in the collection, and the total amount there ever can be. Lets jump right in with an example. View our Seal of Approval NFT on Opensea. If you scroll down to where is says details, you will see “Contract Address”. When you click the contract address is will then take you to Etherscan where you can analyse it!
Now click the contract tab below. You will notice it has a tick next to it which means the contract is official, and has been verified by Etherscan.
Once you click contract, it will then show you the contract for our whole Seal of Approval NFT Collection. We coded this contract ourselves. The contract is coded to give the public certain permissions to carryout particular functions. If you click “Read Contract”, then you can view certain read only data. Read only just means you can only interact with this contract by reading information from it.
OK, here is the fun part. You can now click on the tabs to read from the contract. For example, maxSupply means the total number of NFT tokens that can ever be minted. We set this to 100. This means we could not create more NFTs for this collection even if we wanted to! This is what makes projects like this collectable, as there are strict rules for this collection, and how it is traded.
If you click maxMintAmount tab, then this tells you the max number of NFTs that one person can mint (create) for that collection. We believe in our collection so much, we minted the whole lot ourselves, which is why this is set to 100. We had to pay a hefty gas price for this! You can also find out other information such as the current owner of a particular NFT. It is important to remember that we are the original creators and owners of all our NFTs. However, when someone buys from us, it means they are now the owner. That person can then choose to sell it on if they wish.
Factors that Effect Tokenomics
Total Supply
This is the maximum number of tokens that can ever be minted (created). This data can be found on contracts via Etherscan.
Max Mint Amount
This is the total number of NFTs that can be minted (created) by one person for that collection. This data can be found on contracts via Etherscan.
Max Supply
This is the total number of tokens currently minted (created), and are in circulation. This data can be found on contracts via Etherscan.
Minting Process
Tokens can be minted via a smart contact, or via the lazy minting process. Most investors will probably see the smart contact method as more valuable as the creator can set strict rules for how the NFT will be traded. At Crypto Dreams, we believe deploying a smart contract to Opensea is the best and most professional way of doing things.
Transactional Fees
This is the price someone will pay for an NFT. The total transaction fee will be a combination of the mint price and gas price. The transactional fee is a very important aspect of any NFT project. If the transactional fee is too low, then the project might not make a good profit, or even lose money. Too high, then it will likely not sell. Once a contract is uploaded to Opensea, the platform then allows you to set your for sale or bid price.
Creator Fee
If you are an NFT creator, then creator fees are usually set in marketplace platforms such as Opensea. This means the creator will get a certain percentage every time their NFT is sold on to someone else.
Incentives / Utility
Some NFT projects like to offer Incentives or Utility to customers who buy their NFTs. These are perks which come in many forms, such as discounts, free gifts, and more. At Crypto Dreams we offer people a chance to be on our exclusive white list.
The Bottom Line
It is an important concept to consider when making an NFT investment decision. In general, projects that have smart and well-designed incentives tend to generate more revenue, and able to hold token value. Tokenomics weighs up the ability of a projects to create and hold profit for the long term.
A good NFT project should have higher demand over time, which will help to constantly attract investors. Tokenomics should not just be studied by investors, but also the founding members and developers of the project.
