Poor tokenomics will kill good projects ( this is how to improve them )

Although good tokenomics cannot save unsound projects, even the most promising networks can fail due to poor token design. Dramatic explosions like Terra LUNA and Celsius expose the dangers of financial fraud—algorithmic stablecoins and profit schemes disguised as innovation. But there are still many other high-potential projects that are economically committing suicide through easily avoidable mistakes. Blue-chip projects with real technical value and legitimate use cases, such as Aptos, have seen billions of dollars in market capitalization evaporate overnight due to poorly managed token unlocks and poor communication. It is crucial for cryptocurrency founders to intensify their focus on token design so that major projects can build a solid economic foundation just like their technical foundation. Serious errors in token design The biggest mistakes about tokenomics that I see in solid projects are: Large valuation gap Although projects often provide initial investors with tokens at a lower price compared to later rounds, founders should be cautious about allowing a large price discrepancy between these early rounds and public buyers. This can be easier said than done as savvy investors demand lower prices to mitigate the threat of investment rejection. However, an investor with a low entry price compared to the back round essentially guarantees their profits even at a price lower than the public buyer's cost base. This means that losses for buyers in later rounds can still lead to profits for the earliest token holders – creating an unfair imbalance in the project's token economy Poor Vesting Schedule Too many projects turn public buyers into liquidity escape routes for initial investors and insiders. Nothing destroys a community faster than witnessing initial insiders dumping tokens while public buyers hold onto withered bags. The unlocking timing is very important. While a long lock-up schedule and vesting may seem good for increasing value, they almost always ensure predictable selling pressure when investors are forced to hold on too long and scramble to sell off. Rapid unlocking can help quickly discover price and expand the token holder base, but it also allows whales to dump, creating "red candles" and eroding public confidence. Founder Over Selling Sometimes the prospect of turning newly minted digital tokens into real value is too enticing for the founders who created them. I have witnessed projects transition from great ideas to public trading with a value of over one billion US dollars, creating millionaire founders in the process. Even the most disciplined individuals are tempted to sell their stakes and exchange project tokens for cash. For example, Mantra suddenly lost 92% of its value in just 90 minutes. Despite the CEO's contrary claims, blockchain analysts quickly pointed out significant internal movements of at least $227 million into exchanges, indicating an internal sell-off. High listing value Founders are often tempted to list at a higher valuation because they create bigger headlines, attract attention, and generate hype. The founders are not entirely to blame, as even Binance is known for offering unusually high listing valuations, with projects like Hamster Kombat (HMSTR) listing at a market cap of over 700 million dollars and Notcoin listing at an astonishing 1 billion dollars at launch. But overvalued project listings create a lot of "air" underneath them, and when everyone has the money, there will almost certainly be a race to the bottom, and token holders will quickly withdraw their funds to get a more favorable price than the person next to them. A high starting valuation also means that the prospect of public buyers earning multiples from their investment will be less, reducing secondary market demand. When you have multiple holders selling and no one buying, the end result is a death spiral While projects like Hamster Kombat set records for engagement in the industry and are listed on top exchanges worldwide, its excessively high value upon listing has caused a 87% drop to the lowest recorded price. What is really effective in tokenomics BTC and ETH hold the top market capitalization positions for good reason. In addition to launching early, they have demonstrated some core principles that help distinguish sustainable token models from hollow speculative vehicles. Actual scarcity The fixed supply of 21 million Bitcoins is not only powerful because it is scarce but also powerful because the market firmly believes that this limit will not change. Deep product integration The basic question that every project needs to answer honestly: Can your product operate without a token? If so, there is a chance that you are imposing a token where it is not needed. Projects like Filecoin exemplify this principle very well—their tokens are essential for the storage market functionality of the network, making it nearly impossible to separate the product from its token. In contrast, projects that attach tokens as an afterthought often see their tokens lose value over time. Sales limitation Projects should structure pricing in each sales round with decreasing spreads and design lock-up schedules to prevent low-price buyers from "dumping" their tokens to participants in later rounds. Creating a tiered vesting schedule limits early selling for low-entry buyers while allowing later round participants to reduce their risks beforehand, thus providing a reasonable balance between profits for early buyers and price protection for later buyers. Use the audited compensation claim contract A well-structured token economy goes beyond what is written in a document. Projects should take it a step further and ensure their tokens are held in an immutable smart contract, audited by a third party, ensuring transparency and compliance from all parties. Realistic evaluation and supply management A lower initial valuation may seem like leaving money on the table, but it creates room for meaningful appraisal. Projects launching at inflated valuations do not provide much profit for new participants, killing the momentum and growth of the community. A low total supply allows for better price control and market response. It makes the token more meaningful, making manipulation harder and price volatility more significant. Token management operation Good tokenomics is not a set-it-and-forget-it approach—it requires continuous management. Here are some best practices: Strategic supply management: Only increase the circulating supply in rising markets. This prevents further sell-offs of tokens in markets that are already weak. Buyback program: Implement token buybacks when selling pressure is high to stabilize the price and signal the project's commitment to a high token valuation. Controlled liquidation: Require large investors to use market makers when selling significant positions to prevent large price impacts from sudden sell-offs. Build to last long term The most successful projects approach tokenomics as an extension of product design rather than just a technical finance exercise. Thoughtful tokenomics is a signal to the market about a product and a dedicated team. Your token is ultimately your best marketing tool—it rewards loyalty and financial ties with users.