How to Design Tokenomics: Your Blueprint for a Winning Web3 Project

This document was designed for web3 founders.

It aims to show clarity on our systematic process to designing superior tokenomics frameworks, our step by step process to tokenomics design and our signature traits.

In this report, we go into everything we design, from zero to one.

The supply and demand dynamics of token economies, and some of the learnings of our past 3 years.

Launching a crypto project is thrilling—until it flops.

Did you know most new tokens crash and burn within months? In fact, data indicates that merely ≈ 5% of tokens maintain a price above their TGE listing price after three months.

One of the main reasons? Poorly designed tokenomics.

But here’s the good news: with the right tokenomics design, your project can accelerate network effects, attract investors, and build a loyal and aligned community.

It's important to clarify that there is no such thing as a perfect tokenomics model, only balanced models.

Tokenomics is a multidisciplinary field that blends hard sciences (math, physics), soft sciences (psychology, sociology, economics), and applied sciences (systems engineering). 

Since human behavior plays a key role, tokenomics rarely deals in absolutes. There are no universally right or wrong answers, only trade-offs that optimize for specific objectives within unique constraints.

Why it Matters

Tokenomics is a multifaceted concept. Many crypto project founders think tokenomics design is just about:

• A token’s max supply number

• A pie chart showing 10%–20% allocated to the team

• An emissions schedule

While these are elements of a project’s tokenomics, they don’t capture the full picture.

A full tokenomics design covers the following 6 core verticals:

1. Purpose and Utility of the Token

2. Economical Model (we cover token distribution, inflation, supply shocks and more)

3. Fundraising Setup (we cover the potential valuation, terms and conditions for investors, etc)

4. Value Creation and Accrual (how the token ecosystem creates and maintains value)

5. Value Capture (a business ability to profit out of the transactions)

6. Incentives system (token mechanics to direct users behaviour)

You then need to ensure that these elements work together to create a balanced, sustainable ecosystem, like a perfectly aligned Rubik’s Cube.

However, just like every twist in the cube can disrupt its harmony, each design decision must be handled carefully to avoid destabilizing the model.

Tokenomics isn’t just geeky jargon—it’s one of the core pillars of your crypto project. Just as countries need strong economic policies to grow, Web3 projects need carefully designed tokenomics to succeed.

Here’s why it matters:

• Controls the big four: Token allocation and distribution, supply and demand drivers, utility and purpose, and, perhaps most importantly, the value triangle (value creation, value accrual, and value capture).

• Get it wrong: Investors bail, users vanish, and your vision dies

• Get it right: Secure funding, accelerate network effects, decentralized governance, provide user ownership, and build a vibrant community with incentives aligned.

Our Edge

At BlackTokenomics, we don’t mess around with guesswork, we follow our number one core principle, being data-driven. After three years we’ve recorded and analysed over 2000 token launches on our database, from blockchain projects (L1 and L2s), zkrollups, DePIN, RWA, you name it —plus it only gets better..

Our data analysts continuously update this database with fresh data from new token launches every day. This allows us to cross-reference tokenomics designs with actual price performance, ensuring that our insights are rooted in real-world data, not just theoretical analysis.

No fluff, no hype — we just build tokenomics models that aligns with the data of the best performing projects.

Whether you’re prepping for raising funds through token sales, or building your incentive system, this guide is your shortcut to success.

Want to see how the pros do it? Let's get started.

What is Tokenomics, Anyway?

The Basics of Token Economics

Tokenomics - short for "token economics" - is the engine powering your crypto project's digital asset.

How Tokenomics Powers your Project

To briefly explain why tokenomics is so important, we can group its major impacts into four key areas:

• Incentivizing and directing user behavior (for token adoption)

• Accelerate Network Effects (initial bootstrap phase, specially in L1 blockchain networks)

• Enabling user ownership

• Fundraising (Token Sales) | SAFTs

A Structured Step-by-Step Guide to our Designs

When we design a tokenomics model we break it down into 6 fundamentals phases:

Phase 1: Discovery and

Fundamentals

In the Discovery and Fundamentals phase, we lay the groundwork for the tokenomics model by reviewing core documents (whitepaper, technical paper) and holding initial team meetings to set a clear plan.

We establish a source of truth document and conduct niche-specific research, including a top 10 competitors analysis. This foundational approach ensures all essential elements are captured for the next phases of tokenomics design. Here we:

• Review whitepaper, technical paper, and fundamentals.

• Hold initial team meetings and set the plan.

• Create the source of truth document.

• Analyze niche-specific database records.

• Conduct a top 10 competitors analysis.

• Define stakeholders and agents (users, validators, nodes, miners).

• Develop token utility flow with participants.

• Define listing strategy (if applicable). — IDO (prev known as initial coin offering), IEO, etc

• Outline core incentives: desired/undesired behaviors, motivations, and incentives.

Phase 2: Audit and/or Initial Design

Based on the insights gathered during the Discovery Phase, we develop the main fundamentals of the tokenomics design. This initial design outlines the basic economic attributes, supply mechanisms, token distribution plans, and token utility functions.

Here we execute a Tokenomics Audit through our own platform (using the database as the underlying technology) with a hexagonal approach focusing on the core economic parameters (Inflation, supply shocks, risk of dilution, distribution fairness, private investors rounds balance, supply metrics and other benchmarks vs the niche and best performers). We also:

• Define the fundraising targets

• Design the rounds for investors (algorithmically balanced)

Phase 3: Economy Design

We focus on establishing the:

1. Allocation Distribution

2. Vesting release schedule

Following the market standards, and best practices to make sure we have the core economic parameters under control.

The Allocation Distribution

 is a crucial part of the token’s monetary policy. It dictates how tokens are allocated among various stakeholders (also known as token distribution), such as the team tokens, the foundation, the investor's allocation, the community, and ecosystem participants.





When formulating a token distribution strategy, we consider several crucial factors:

• Alignment with project goals
  We make sure the distribution aligns with the project’s mission and vision. It’s about ensuring that tokens are distributed in a way that drives the right actions from participants. For example, a decentralized lending platform might allocate tokens to both borrowers and lenders, while a gaming platform could focus on game developers and players.



• Fair and equitable distribution
  Fairness is critical here. Token distribution needs to be done in a way that reflects each participant’s contribution or engagement with the network. We always aim to avoid centralization risks, because too much concentration of tokens among insiders can lead to governance imbalances and decision-making challenges (fair governance mechanisms).

Next, we focus on the vesting release schedule. At the heart of this process is our proprietary algorithm, which balances different funding rounds by running multiple models to ensure fairness for every stakeholder.

The vesting release schedule isn’t just about timing—it dictates how and when new tokens enter the market. This policy has a direct impact on the project’s inflation rate, potential supply shocks (vs the token circulation), and how fairly tokens are distributed among stakeholders. Ultimately, it influences the entire economic balance within the ecosystem.

Let me be crystal clear here—linear vesting is the parasite of tokenomics. Like a slow rug-pull, draining value steadily over time. Rewarding mediocrity, not performance.

Logarithmic vesting > linear schedules, specially for protocols chasing rapid network effects. But you must control selling pressure through smart incentive systems, while ensuring you reward true contributors not value extractors.

Exponential vesting > linear schedules. Ideal for low-float launches. Slow, steady growth prevents supply shocks. (This is still a low quality project mentality)

S-curve vesting > linear schedules. Best for the investors pool starts slow, ramps up, then levels off reducing early selling pressure.

But the real winner is: Adaptive KPI-based vesting > all schedules. Using oracles to reliably connect vesting triggers to real world data, like:

• User adoption → Unlock proportional to active users.

Adaptive KPI-based vesting:

• Prevent unnecessary inflation and supply imbalances.

• Ensure token supply grows in parallel with actual demand.

Phase 4: Validation and Optimization

Our Validation process involves data-driven analysis, comparing the model against market standards, and competitors, also known as "value comps". Ensuring:

• fair distribution

• alignment with token standards

• compliance with legal frameworks

• alignment with the community accelerating ecosystem's development.

On the Optimization layer we ensure that the design aligns with the project’s vision and goals and operates within our unique set parameters and constraints. Making sure that key areas like inflation, supply shocks, dilution risk, distribution fairness, investor balance, and other supply metrics are under control.

Phase 4.1: Fundraising Documentation and Models (for Investors)

In this phase, we turn the static tokenomics into an interactive model, transforming the token structure into a dynamic experience for potential investors, where they can actually simulate scenarios, and play with the framework.

We understand that is not enough to have the right numbers you also need to present them in a way that truly resonates with private early investors. Our tokenomics development/deliverables in this phase are:

Python interactive streamlit model

We use Python to simulate, model, and validate tokenomics frameworks with precision.

Tokenomics slides for PitchDeck

Investors Report and Documentation

When it comes to private investor-focused documentation, our goal is to highlight the investment opportunity and the financial potential of the tokenomics model. Investors care about the bottom line: how their investment will grow, what risks are involved, and how the model safeguards their capital.

Community Documentation

On the other hand for the community documentation, the approach shifts to a broader, community-focused perspective. The community isn’t necessarily looking for ROI metrics, they want to understand the token utility. So we put the spotlight on token utility flows and incentives.

Including Valuation Models

Valuing a Web3 project before its Token Generation Event is exceptionally challenging. Unlike traditional equity, where shares represent a stake in a company with established cash flows and financial statements, tokens in decentralized networks do not directly reflect a company's intrinsic value.

Instead, a token's value depends on future network adoption, usage, and tokenomics rather than on current earnings.

Based on our analysis, we recommend a multi-faceted valuation approach that combines three main fundamental models. This strategy will provide you with a robust framework to assess your project's valuation.

Scenario-Based Financial Modeling (Discounted Cash Flow Model)

In this approach, we project future protocol revenues based on anticipated network adoption, transaction volumes, and fee structures. Because the project has not yet launched, we develop best-case, base-case, and worst-case scenarios. We then discount these future cash flows at a high rate (recommended for Web3 is 40%) to account for the significant risks involved.

Tokenomics and Value Capture Models

This model focuses on the economic token design vertical. By applying the equation of exchange 

(MV = PQ), we connect projected transaction volumes with the token price. We also factor in token velocity, staking mechanisms, fees or token burning mechanics to estimate how much of the network's economic activity will be captured by token holders.

Market Multiples and Comparables
Even in a pre-launch scenario, we can benchmark against similar projects within the same niche. This method uses multiples such as price-to-sales or the market capitalization relative to Total Value Locked derived from early funding rounds or peer projects.

By estimating future revenue or TVL multiples and discounting these figures to present value, we gain insight into how the market might value your token compared to its competitors. Firms such as Multicoin Capital use such comparisons while adjusting for differences in token supply and network utility.

Our recommendation is to integrate all three models into your valuation process.
The Discounted Cash Flow model provides a forward-looking, risk-adjusted estimate of future cash flows. The Tokenomics model highlights how the design and economic incentives of your token create and capture value (which we will cover in the next section). And finally, the Market Multiples approach offers a reality check by comparing your project to similar competitors in the industry.

Phase 5: Incentives Systems

At BlackTokenomics, we view incentives as the core mechanism that drives user behavior within an ecosystem.

By carefully designing and aligning incentives, we ensure that users are motivated to act in ways that create long-term value and support the health of the entire blockchain network or protocol.

Our Circle Model breaks down the fundamental layers of creating an effective incentive system.

We follow a structured, step-by-step approach focused on aligning incentives with desired behaviors within the ecosystem.

The first step is to identify who are the participants in your network and what tasks they perform. Understanding these roles gives us a solid foundation for knowing how different types of users interact with the product.

Whether they are validators, liquidity providers (liquidity provision), etc or regular users, each group has distinct tasks and contributions that need to be addressed in the incentive design. Once we’ve understood the participants and their motivations, we move on to how users create value for the project. Whether it’s through staking, liquidity provision, or contributing in other ways, each action should add value to the ecosystem or within the ecosystem.

The tokenomics incentive system must be designed to reward these actions appropriately. This ensures that value creation and distribution are balanced, and participants are properly incentivized to continue supporting the project.

From there, we focus on the actual incentive design. by identifying what behaviors we want to encourage and what actions we want to discourage. This includes setting up rewards (carrots) for desired actions (like staking rewards) and penalties (sticks) for behaviors that could harm the ecosystem.

After determining the incentives, the next step is translating them into mechanisms that can be coded into the system. These incentive mechanisms ensure that the systems can be applied and that users are automatically rewarded or penalized based on their actions via smart contracts.

At this stage, we also consider the side effects of the incentive mechanisms, running tests to ensure they don’t backfire or lead to unintended behaviors.

Finally, we map out the full incentive system, visualizing how all mechanisms interact with each other and ensuring that they align with the project’s overall goals and then are automatized via smart contracts.

Simulations: Prove it Works

Simulations let you see what might happen to your token before you start—it’s smart to test them early. Think of it like trying a game before you play for real—you find the weak spots first.

Our team uses special tools to do this, built from looking at over 2000 token projects. Using tools like:

• cadCad

• Machinations

• Stochastic Modeling

• Streamlit.

Here's what we check:

• cadCAD: This tool maps how your token moves—like how fast it grows or changes.

• Monte Carlo: Tests risks — price drops, inflation spikes.

• Stochastic runs: Predicts odds.

• Machinations: Models systems and identifies bottle necks

• Streamlit: is a python library to run simulations within unique constraints.

If you skip testing, you’re asking for problems.

For simulations, we run Monte Carlo to spot big risks and stochastic runs to show chances, all put on Streamlit dashboards so you see clear results.

Plus, we use Python to power advanced tools like our Vesting Diluted Valuation (VDV) model, giving precise insights into vesting schedules and investor returns.

This expertise is why top Web3 founders trust us to design their tokenomics.

Phase 6: Tokenomics Modeling

What beginners fail to understand, is that modeling is not useful for predicting outcomes, it’s useful for analyzing risks. In other words, modeling is not about understanding what will happen, it’s about understanding what can happen and the relative probabilities of various outcomes.

↑ PLEASE REMEMBER THIS

In other words, modeling is not about understanding what will happen, it’s about understanding what can happen and the relative probabilities of different outcomes.

Modeling allows designers to quantify risks, identify key assumptions, and optimize system design to strike the best risk-to-reward balance for their use case and avoid catastrophic events before they happen.

When most people think of modeling, their first thought is spreadsheets.

Excel. Google Sheets. Rows. Cells. Formulas. That’s modeling, right? That’s one kind of modeling, but that’s not all there is to it.

This kind of modeling is very useful, especially for quick drafts, simple thought exercises, less complex systems, one subcomponent of a larger system, systems with less randomness or uncontrollable variables, less mission-critical use cases, and for creating interactive calculators that are more friendly for non-technical team members and users.

These kind of models are less useful when it requires analyzing systems with multiple moving pieces that recursively influence each other, or analyzing the relative probabilities of a large or open ended range of possibilities.

The more complex a system, the more important modeling becomes.

Tests and Simulations

Its extremely important testing your tokenomics model to make sure it’s ready—you don’t want surprises messing up your project development after launch.

It’s like testing a boat before sailing: you check it floats so token holders don’t sink later (the tokens should, but not the holders). Circulating supply means the tokens openly circulating—how many are out there for people to use, hold or sell. It does not refer to the total token supply you set earlier—and it’s got to fit your target audience, or demand goes wrong.

Our team runs simulations—special checks with tools—to see how this works within the ecosystem. We use cadCAD to watch how token economics flow and Monte Carlo to find big risks, like if token value proposition drops fast.

This lets us tweak your token design—for example, the fixed supply mechanics or the token burning ideal levels—to stay strong and reduce the selling pressure. Testing keeps your plan steady and real, not just a guess.

Some Key Elements of a Tokenomics Design

Some other things that help are choosing the right:

Token Types: Picking the Right Fit

Your token type shapes your project’s economy—choose wisely to align with your goals.

• Security Tokens: Represents ownership, like equity in a DAO or asset-backed stakes.

• Utility Tokens: Grant ecosystem access, for example.

• Governance Tokens: Enable voting rights, often tied to staking rewards, using a ve-model (vote escrow)tied with slashing mechanisms set in the governance mechanisms.

Total Supply: How Much is Enough?

Token supply isn’t just a number — the max number of tokens is important. The total supply should be defined and limited.

There are several reasons why some project founders prefer a larger number of tokens as the token max supply rather than a smaller supply:

• Psychological Effect A larger token supply can create a perception of affordability and early adoption among potential buyers, which can lead to increased demand and adoption.

• Liquidity A larger token supply can also increase liquidity, making it easier for buyers and sellers to transact with each other. This can be especially important for tokens that are intended to be used for trading or as a medium of exchange.

• Distribution A larger token supply can allow for broader distribution, which can help to increase decentralization and reduce the risk of centralization or concentration of tokens in the hands of a few token holders.

On the other hand, some project founders may prefer a smaller token fixed supply because it can create a perception of scarcity and exclusivity, which can potentially increase the token's value. Additionally, a smaller supply can also help to reduce the risk of inflation and ensure a more stable utility token price by reducing the supply shocks. But this is not always true, at the end of the day everything depends on the initial float.

Ready to Build Your Tokenomics? Let’s Talk!

There you go, we hope this guide was useful—six steps to design superior tokenomics.

We wrote this in a way so that the readers, project founders, could grasp the significance of tokenomics, understand our technical process and why it matters, so they are able to engage in technical conversations when interacting with their community or pitching to investors.

Our team at BlackTokenomics is here with data and tools to to help, we focus on early-stage projects, where we directly support founders.

Over the past three years, we’ve proudly supported 83 clients with two ranked in the top 30 by MCAP and several in the Top 100,  we are now extremely selective about whom we work with, maintaining our reputation of only working with the best.

Ready to build? Reach out at info@blacktokenomics.com