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You shouldn't buy a house before checking the foundation.
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You shouldn't buy a car before checking the engine.
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So why are you buying crypto before checking the tokenomics?
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Today, we're learning how to read the blueprint of digital assets.
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Welcome back to Unwrapped, your deep dive into DeFi, NFTs, on-chain culture, and all
things in the BMX ecosystem.
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And today, we're going back to basics.
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We're tackling the single most important word in crypto, tokenomics.
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It's a mashup of token and economics.
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Put simply, it's a set of rules that
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determines if a cryptocurrency is designed to gain value or on a slow downward spiral to
zero.
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If you've ever wondered why a coin with a 1 cent price tag isn't actually cheap or why
projects with a crazy high APY are flashing the pans, the answer is usually tokenomics.
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By the end of this video, you'll be able to look at
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any project and spot some of the common red flags that 99 % of people miss.
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And then we'll finish by looking at how the BMX token was designed to solve some of the
biggest problems in this field.
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And as always, just a quick reminder, this is for educational purposes only.
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It is not financial advice.
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Let's start with the first pillars of tokenomics, supply and market cap.
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The most common mistake that
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beginners make when deciding which crypto is quote unquote affordable is looking at the
price of a token.
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Oh, look, this coin is only one penny.
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And if it goes to one dollar, I'll be a millionaire.
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This is a trap.
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And to understand why you have to understand that price is meaningless without
understanding supply.
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Think of a project's value like a giant gold bar worth exactly 100 million dollars.
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Crypto Project A is that solid giant gold bar.
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As a whole, it costs $100 million.
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The supply here is one.
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It's expensive because there's only one of them.
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Crypto Project B is also just like that giant gold bar.
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And as a whole, it costs $100 million.
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But this bar was cut into 100 million pieces.
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Here, the supply is 100 million.
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which means the price of each token is $1.
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Crypto Project C is once again that same giant gold bar worth $100 million, but we've
ground it down to 10 billion tiny gold specks of dust.
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Here, the supply is 1 billion, which means the price of each speck or the price of each
token, is 1 cent.
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So, token C, each one costs 1 cent.
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A beginner who hasn't watched this video looks at the speck and says, wow, it's so cheap.
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I'll just buy a million specs and when the token price reaches $1, I'll be a millionaire.
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Let's do that math.
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For that tiny speck to reach $1, the total value of that giant gold bar, or the market
cap, would have to go from $100 million to $10 billion.
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That means this gold bar, or
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Crypto Project C would have to become as valuable as a Fortune 500 company just for a tiny
speck of dust to reach $1.
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It would have to become one of the most valuable crypto assets.
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So what's the lesson?
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Well, you aren't getting a deal on the price.
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You're just buying a smaller slice of that same bar.
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So how do you spot the real value?
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You ignore the price and you look at the market cap.
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So how do we find the market cap?
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Easy.
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you can just visit Coingecko.com and by default all the crypto assets there are sorted by
market cap.
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Or you do a simple calculation.
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Current price times circulating supply, which we'll cover soon, equals the market cap.
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And the market cap tells you what the whole gold bar is worth.
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Not just the dust, but there is a hidden danger here.
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You also need to look at what's called the FDV or fully diluted valuation.
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This is the value of the project if all the tokens that will ever exist were sold today.
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And now a red flag.
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If you see a project with a market cap of let's say $1 million, but the FDV is $100
million, that's a massive warning sign because it means that 99 % of tokens are waiting on
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the sidelines
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ready to flood the market and dilute its value.
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Inflation and Emissions This leads us to the second pillar.
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Inflation, also known as Emissions.
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In the real world, governments print money.
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When they print too much, your dollar is worth less.
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This is inflation.
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Think of it this way.
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In 1970, a cup of coffee cost 25 cents.
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Today, that same cup of coffee
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Costs $3.
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Did the coffee get 12 times better?
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No.
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The coffee pretty much stayed the same.
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Your money just got weaker.
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And in crypto, projects simulate this by creating or printing tokens to reward people.
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If you stake your tokens and get over 100 % APY, well you should probably look into where
those rewards are coming from.
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It's not magic money.
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Usually it's inflation.
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The protocol might be printing more tokens to reward you.
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The lockup trap.
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Now, here's where it gets a little tricky.
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Some protocols know that inflation kills their token value.
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So they try to hide it.
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They tell you to lock up your tokens for a period of time and they'll give you massive
rewards.
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That sounds great, but it's often just
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disguise because they're printing millions of tokens while asking you to lock them up so
that you don't sell them.
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It keeps the price stable for a while but eventually those lockups will expire.
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It's like sweeping dirt under the rug.
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Eventually the rug will get too lumpy and everyone will trip over it and when those tokens
finally unlock the inflation dam breaks and the value often collapses.
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So the lesson, high APY sometimes means high inflation.
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If the token supplies doubling every year, that means the demand needs to double just to
keep the token price the same.
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And that's why a zero emissions model where a project is literally unable to print new
tokens is becoming the new standard.
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Because if the token printer was intentionally broken, that token value can't be inflated
away.
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Allocation Investing Let's talk about allocation.
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Who actually owns the tokens?
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When a new project launches, look at the pie chart in their white paper.
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How much did the team get?
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How much did the early VC investors get?
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How much was sold to the public?
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If the team and investors own 50 % of the supply, that's a lot of power.
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If they sell in large amounts, the price can crash.
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And this is why you need to check the vesting schedule.
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Think of vesting as sort of a trust fund.
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Imagine a wealthy kid turns 18.
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He has $10 million in his name, but the rules of the trust fund says he can't access the
entire $10 million today.
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Instead, he gets access to $1 million a year for the next 10 years.
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This is a vesting schedule.
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It forces a team and investors
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to stay committed for the long term.
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And here's a couple of key words to be aware of.
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Cliff.
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A cliff means they get nothing for a set of time, usually around a year or so.
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Linear vesting.
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Linear vesting means they get a small amount every month after the cliff ends.
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And here's a red flag to keep in mind.
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If a project has a very short vest, be careful.
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They might be planning to sell their tokens the moment the price goes up.
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So again, please be careful.
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Utility.
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Ok so we've covered supply, market cap, price, inflation, and allocation.
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But none of that matters if nobody wants the token.
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Tokenomics is just supply and demand.
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We've talked about supply, utility is what drives the demand.
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So we have to find out why this token exists.
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So let's cover some of the common use cases for a token.
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Gas.
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You need ETH to use Ethereum.
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Sol to use Solana.
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This is one of the strongest utilities because you have to buy the token to use the
network.
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Governance.
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With governance, you hold a token to vote on changes.
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For example, with BMX, holders of the token get to vote on change proposals, such as
changes to how fees are routed throughout the ecosystem.
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Real value.
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So this is the holy grail.
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This means that holding the token earns you a portion of the protocol's value.
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Not in printed tokens, but in solid assets like ETH or USDC.
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If a token has no utility, it's just a meme coin with no meme.
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And that's fine, so long as you know you're gambling on popularity, not on fundamentals.
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Before we break down the ideal tokenomics model, a quick word about the ecosystem that
makes this show possible.
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BMX.
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We've been talking about utility and real value, and that isn't just a theory we cover.
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It's the philosophy behind our flagship product.
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DeliSwap.
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You see a lot of dexes have poor tokenomics designed right into the product.
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They try to trap you.
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They force your trades through their own platform just to collect the fee, even if that
means giving you a bad price.
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And DeliSwap takes the opposite approach.
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It's a meta aggregator.
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It scans every single route on the base ecosystem for you.
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If another DEX has a better price, DeliSwap routes your trade through that DEX
automatically, even if it means forfeiting the fee.
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Because it's not about protocol profit.
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It's about giving you the fairest execution every time.
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And for liquidity providers,
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It's the ultimate real value utility.
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Instead of pairing with the naked inflationary token, you pair with WBLT.
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That means your liquidity is instantly backed by Bitcoin, Ethereum and USDC.
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And you earn fees from the entire BMX ecosystem.
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Swaps, perps, intents, NFTs, fees from all on-chain activity, all in one position.
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One position, three blue chips, more ways to earn.
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So stop guessing which decks will give you the best price because the deli is open.
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Now, let's see how we apply that same real value philosophy to our own token.
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The real value evolution.
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So what does good tokenomics look like today?
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We'll use the BMX token as our case study because when we designed this, we looked at the
failures of the past.
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The infinite printers, the hidden unlocks, and we did the exact opposite.
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So here's the BMX tokenomics blueprint.
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Zero emissions.
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Remember how we talked about inflation making your digital assets weaker?
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Well, BMX has zero emissions.
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But we went a step further.
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We didn't just stop the printer, we destroyed it.
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The minting contract is burned.
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That means there will never be more BMX than there are today.
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In fact, all tokens are currently in full circulation.
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There are no hidden supplies waiting to unlock.
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What you see is what you get.
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Real value.
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So if we don't print tokens, how do we reward BMX stakers?
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We capture real value.
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You see, BMX is an ecosystem of products.
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And every time someone trades or swaps or buys an NFT, they're paying a small fee.
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And all those small fees are collected.
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and a portion are routed to BMX stakers in the form of wrapped ETH, which is a token that
holds the same value as Ethereum.
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If you stake your BMX, you don't earn more BMX.
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You earn a stream of wrapped ETH derived from all those platform fees.
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It's about capturing and distributing real value, pure and simple.
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Multiplier points.
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We also wanted to solve the mercenary problem.
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We didn't want people hopping in for a week and leaving.
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So we created multiplier points.
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When you stake BMX, you earn multiplier points.
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These aren't tokens you can sell.
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Think of them like on-chain loyalty points that boost your share of the wrapped ETH
rewards.
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But here's the catch.
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If you unstake your BMX, your multiplier points are burned.
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And this aligns the incentives.
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So the longer you stay, the higher your portion of the value captured by the ecosystem.
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It rewards the long-term holders.
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Fee backing.
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On DeliSwap, our decentralized exchange, 97 % of the trading fees are used to buy back BMX
from the open market and distribute it to liquidity providers.
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This creates constant organic buy pressure for the token, fueled by actual usage of the
platform.
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The tokenomics cheat sheet.
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Alright before we go, here's your tokenomics cheat sheet.
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If you keep these in mind, you'll be way ahead of 99 % of everyone else.
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Price.
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Price is the cost of one token.
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It's meaningless without knowing the supply behind it.
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Circulating supply.
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Circulating supply is the number of tokens actually available on the market today.
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This excludes locked, vested, or unreleased tokens.
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Total supply.
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Total supply is the total number of tokens that will ever exist.
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And this includes locked, vested, or unreleased tokens.
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Market cap.
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The market cap is the price of all tokens available today.
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FDV.
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FDV is the price of all the tokens that will ever exist combined, not just the tokens
available today.
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A bit of a cheat code.
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If FDV is way higher than market cap, be careful.
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Because this means a massive dilution is coming later.
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Inflationary value.
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Now let's talk about real value versus inflationary value.
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Real value comes from on-chain activity.
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This is a key ingredient to a sustainable project.
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Inflationary value comes from printing new tokens, which devalues the token.
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Cliff.
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A cliff is a waiting period where the team or investors get zero tokens.
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Vesting.
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Vesting is the schedule for releasing tokens after
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that cliff ends.
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And the cheat code here, look for long cliffs, about one or more years to ensure the team
is committed.
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And finally, utility.
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Utility is what the token actually does.
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Tokenomics is the blueprint of value.
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It tells you if a project is a get rich quick scheme for the founders or a sustainable
economy built for the users.
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The old model was
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print tokens, inflate the supply and hope new people keep buying.
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The new model is provide a service, capture value and share that real value with users of
the ecosystem and ideally with zero emissions or tokenomics gimmicks.
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So the next time you look at a new crypto project, don't just look at the price, look at
the supply, look at the market cap, check if the minting contract was burned, ask yourself
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where does the value come from?
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If the answer is a printer,
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Be careful, if the answer is real value from on-chain activity, you may have found
something pretty special.
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Thanks for watching this episode of Unwrapped.
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If you found this breakdown helpful, hit that subscribe button and check out the other
deep dives and our conversations with builders in the crypto space.
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Class is dismissed and I'll see you on the next one.
00:00:14,517 --> 00:00:16,828
You shouldn't buy a house before checking the foundation.
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You shouldn't buy a car before checking the engine.
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00:00:18,829 --> 00:00:22,271
So why are you buying crypto before checking the tokenomics?
4
00:00:22,271 --> 00:00:25,593
Today, we're learning how to read the blueprint of digital assets.
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00:00:25,593 --> 00:00:31,916
Welcome back to Unwrapped, your deep dive into DeFi, NFTs, on-chain culture, and all
things in the BMX ecosystem.
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And today, we're going back to basics.
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We're tackling the single most important word in crypto, tokenomics.
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It's a mashup of token and economics.
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Put simply, it's a set of rules that
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determines if a cryptocurrency is designed to gain value or on a slow downward spiral to
zero.
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If you've ever wondered why a coin with a 1 cent price tag isn't actually cheap or why
projects with a crazy high APY are flashing the pans, the answer is usually tokenomics.
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By the end of this video, you'll be able to look at
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any project and spot some of the common red flags that 99 % of people miss.
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And then we'll finish by looking at how the BMX token was designed to solve some of the
biggest problems in this field.
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And as always, just a quick reminder, this is for educational purposes only.
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It is not financial advice.
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Let's start with the first pillars of tokenomics, supply and market cap.
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The most common mistake that
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beginners make when deciding which crypto is quote unquote affordable is looking at the
price of a token.
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Oh, look, this coin is only one penny.
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And if it goes to one dollar, I'll be a millionaire.
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This is a trap.
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And to understand why you have to understand that price is meaningless without
understanding supply.
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Think of a project's value like a giant gold bar worth exactly 100 million dollars.
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Crypto Project A is that solid giant gold bar.
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As a whole, it costs $100 million.
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The supply here is one.
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It's expensive because there's only one of them.
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Crypto Project B is also just like that giant gold bar.
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And as a whole, it costs $100 million.
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But this bar was cut into 100 million pieces.
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Here, the supply is 100 million.
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00:02:39,583 --> 00:02:42,726
which means the price of each token is $1.
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Crypto Project C is once again that same giant gold bar worth $100 million, but we've
ground it down to 10 billion tiny gold specks of dust.
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Here, the supply is 1 billion, which means the price of each speck or the price of each
token, is 1 cent.
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So, token C, each one costs 1 cent.
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A beginner who hasn't watched this video looks at the speck and says, wow, it's so cheap.
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I'll just buy a million specs and when the token price reaches $1, I'll be a millionaire.
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Let's do that math.
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For that tiny speck to reach $1, the total value of that giant gold bar, or the market
cap, would have to go from $100 million to $10 billion.
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That means this gold bar, or
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Crypto Project C would have to become as valuable as a Fortune 500 company just for a tiny
speck of dust to reach $1.
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It would have to become one of the most valuable crypto assets.
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00:03:48,498 --> 00:03:49,938
So what's the lesson?
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00:03:50,399 --> 00:03:53,101
Well, you aren't getting a deal on the price.
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You're just buying a smaller slice of that same bar.
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So how do you spot the real value?
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You ignore the price and you look at the market cap.
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So how do we find the market cap?
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00:04:04,491 --> 00:04:05,013
Easy.
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you can just visit Coingecko.com and by default all the crypto assets there are sorted by
market cap.
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Or you do a simple calculation.
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Current price times circulating supply, which we'll cover soon, equals the market cap.
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00:04:23,774 --> 00:04:28,157
And the market cap tells you what the whole gold bar is worth.
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Not just the dust, but there is a hidden danger here.
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You also need to look at what's called the FDV or fully diluted valuation.
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This is the value of the project if all the tokens that will ever exist were sold today.
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And now a red flag.
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If you see a project with a market cap of let's say $1 million, but the FDV is $100
million, that's a massive warning sign because it means that 99 % of tokens are waiting on
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00:05:00,837 --> 00:05:01,943
the sidelines
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ready to flood the market and dilute its value.
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Inflation and Emissions This leads us to the second pillar.
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Inflation, also known as Emissions.
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In the real world, governments print money.
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When they print too much, your dollar is worth less.
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This is inflation.
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Think of it this way.
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In 1970, a cup of coffee cost 25 cents.
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Today, that same cup of coffee
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Costs $3.
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Did the coffee get 12 times better?
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No.
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The coffee pretty much stayed the same.
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Your money just got weaker.
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00:05:43,191 --> 00:05:50,451
And in crypto, projects simulate this by creating or printing tokens to reward people.
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00:05:50,751 --> 00:05:58,811
If you stake your tokens and get over 100 % APY, well you should probably look into where
those rewards are coming from.
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It's not magic money.
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00:06:01,015 --> 00:06:02,556
Usually it's inflation.
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00:06:02,556 --> 00:06:06,937
The protocol might be printing more tokens to reward you.
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The lockup trap.
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Now, here's where it gets a little tricky.
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Some protocols know that inflation kills their token value.
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So they try to hide it.
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They tell you to lock up your tokens for a period of time and they'll give you massive
rewards.
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00:06:27,086 --> 00:06:30,215
That sounds great, but it's often just
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00:06:30,215 --> 00:06:37,577
disguise because they're printing millions of tokens while asking you to lock them up so
that you don't sell them.
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It keeps the price stable for a while but eventually those lockups will expire.
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It's like sweeping dirt under the rug.
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Eventually the rug will get too lumpy and everyone will trip over it and when those tokens
finally unlock the inflation dam breaks and the value often collapses.
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So the lesson, high APY sometimes means high inflation.
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If the token supplies doubling every year, that means the demand needs to double just to
keep the token price the same.
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And that's why a zero emissions model where a project is literally unable to print new
tokens is becoming the new standard.
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Because if the token printer was intentionally broken, that token value can't be inflated
away.
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Allocation Investing Let's talk about allocation.
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Who actually owns the tokens?
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When a new project launches, look at the pie chart in their white paper.
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How much did the team get?
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How much did the early VC investors get?
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00:07:48,070 --> 00:07:50,252
How much was sold to the public?
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If the team and investors own 50 % of the supply, that's a lot of power.
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If they sell in large amounts, the price can crash.
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And this is why you need to check the vesting schedule.
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Think of vesting as sort of a trust fund.
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Imagine a wealthy kid turns 18.
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He has $10 million in his name, but the rules of the trust fund says he can't access the
entire $10 million today.
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Instead, he gets access to $1 million a year for the next 10 years.
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This is a vesting schedule.
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It forces a team and investors
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to stay committed for the long term.
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And here's a couple of key words to be aware of.
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Cliff.
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A cliff means they get nothing for a set of time, usually around a year or so.
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Linear vesting.
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Linear vesting means they get a small amount every month after the cliff ends.
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And here's a red flag to keep in mind.
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If a project has a very short vest, be careful.
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They might be planning to sell their tokens the moment the price goes up.
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So again, please be careful.
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Utility.
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Ok so we've covered supply, market cap, price, inflation, and allocation.
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But none of that matters if nobody wants the token.
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Tokenomics is just supply and demand.
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We've talked about supply, utility is what drives the demand.
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So we have to find out why this token exists.
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So let's cover some of the common use cases for a token.
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Gas.
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You need ETH to use Ethereum.
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Sol to use Solana.
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This is one of the strongest utilities because you have to buy the token to use the
network.
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Governance.
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With governance, you hold a token to vote on changes.
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For example, with BMX, holders of the token get to vote on change proposals, such as
changes to how fees are routed throughout the ecosystem.
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Real value.
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So this is the holy grail.
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This means that holding the token earns you a portion of the protocol's value.
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Not in printed tokens, but in solid assets like ETH or USDC.
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If a token has no utility, it's just a meme coin with no meme.
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And that's fine, so long as you know you're gambling on popularity, not on fundamentals.
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Before we break down the ideal tokenomics model, a quick word about the ecosystem that
makes this show possible.
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BMX.
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We've been talking about utility and real value, and that isn't just a theory we cover.
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It's the philosophy behind our flagship product.
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DeliSwap.
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You see a lot of dexes have poor tokenomics designed right into the product.
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They try to trap you.
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They force your trades through their own platform just to collect the fee, even if that
means giving you a bad price.
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And DeliSwap takes the opposite approach.
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It's a meta aggregator.
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It scans every single route on the base ecosystem for you.
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If another DEX has a better price, DeliSwap routes your trade through that DEX
automatically, even if it means forfeiting the fee.
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Because it's not about protocol profit.
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It's about giving you the fairest execution every time.
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And for liquidity providers,
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It's the ultimate real value utility.
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Instead of pairing with the naked inflationary token, you pair with WBLT.
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That means your liquidity is instantly backed by Bitcoin, Ethereum and USDC.
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And you earn fees from the entire BMX ecosystem.
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Swaps, perps, intents, NFTs, fees from all on-chain activity, all in one position.
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One position, three blue chips, more ways to earn.
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So stop guessing which decks will give you the best price because the deli is open.
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Now, let's see how we apply that same real value philosophy to our own token.
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The real value evolution.
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So what does good tokenomics look like today?
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We'll use the BMX token as our case study because when we designed this, we looked at the
failures of the past.
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The infinite printers, the hidden unlocks, and we did the exact opposite.
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So here's the BMX tokenomics blueprint.
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Zero emissions.
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Remember how we talked about inflation making your digital assets weaker?
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Well, BMX has zero emissions.
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But we went a step further.
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We didn't just stop the printer, we destroyed it.
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The minting contract is burned.
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That means there will never be more BMX than there are today.
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In fact, all tokens are currently in full circulation.
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There are no hidden supplies waiting to unlock.
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What you see is what you get.
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Real value.
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So if we don't print tokens, how do we reward BMX stakers?
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We capture real value.
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You see, BMX is an ecosystem of products.
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And every time someone trades or swaps or buys an NFT, they're paying a small fee.
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And all those small fees are collected.
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and a portion are routed to BMX stakers in the form of wrapped ETH, which is a token that
holds the same value as Ethereum.
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If you stake your BMX, you don't earn more BMX.
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You earn a stream of wrapped ETH derived from all those platform fees.
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It's about capturing and distributing real value, pure and simple.
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Multiplier points.
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00:13:33,306 --> 00:13:36,797
We also wanted to solve the mercenary problem.
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We didn't want people hopping in for a week and leaving.
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So we created multiplier points.
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00:13:42,946 --> 00:13:46,028
When you stake BMX, you earn multiplier points.
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These aren't tokens you can sell.
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Think of them like on-chain loyalty points that boost your share of the wrapped ETH
rewards.
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But here's the catch.
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If you unstake your BMX, your multiplier points are burned.
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00:13:59,435 --> 00:14:01,356
And this aligns the incentives.
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00:14:01,356 --> 00:14:06,729
So the longer you stay, the higher your portion of the value captured by the ecosystem.
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It rewards the long-term holders.
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00:14:11,339 --> 00:14:12,680
Fee backing.
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00:14:14,615 --> 00:14:25,835
On DeliSwap, our decentralized exchange, 97 % of the trading fees are used to buy back BMX
from the open market and distribute it to liquidity providers.
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This creates constant organic buy pressure for the token, fueled by actual usage of the
platform.
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The tokenomics cheat sheet.
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00:14:36,951 --> 00:14:40,631
Alright before we go, here's your tokenomics cheat sheet.
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If you keep these in mind, you'll be way ahead of 99 % of everyone else.
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Price.
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00:14:48,343 --> 00:14:50,924
Price is the cost of one token.
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00:14:50,924 --> 00:14:54,545
It's meaningless without knowing the supply behind it.
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Circulating supply.
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00:14:57,247 --> 00:15:02,109
Circulating supply is the number of tokens actually available on the market today.
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This excludes locked, vested, or unreleased tokens.
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Total supply.
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00:15:09,912 --> 00:15:13,933
Total supply is the total number of tokens that will ever exist.
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00:15:13,973 --> 00:15:18,475
And this includes locked, vested, or unreleased tokens.
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00:15:19,048 --> 00:15:20,218
Market cap.
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00:15:20,398 --> 00:15:24,139
The market cap is the price of all tokens available today.
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00:15:25,120 --> 00:15:26,460
FDV.
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00:15:27,161 --> 00:15:34,803
FDV is the price of all the tokens that will ever exist combined, not just the tokens
available today.
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A bit of a cheat code.
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If FDV is way higher than market cap, be careful.
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Because this means a massive dilution is coming later.
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Inflationary value.
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Now let's talk about real value versus inflationary value.
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Real value comes from on-chain activity.
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This is a key ingredient to a sustainable project.
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Inflationary value comes from printing new tokens, which devalues the token.
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Cliff.
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A cliff is a waiting period where the team or investors get zero tokens.
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Vesting.
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Vesting is the schedule for releasing tokens after
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that cliff ends.
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And the cheat code here, look for long cliffs, about one or more years to ensure the team
is committed.
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And finally, utility.
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Utility is what the token actually does.
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Tokenomics is the blueprint of value.
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It tells you if a project is a get rich quick scheme for the founders or a sustainable
economy built for the users.
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The old model was
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print tokens, inflate the supply and hope new people keep buying.
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The new model is provide a service, capture value and share that real value with users of
the ecosystem and ideally with zero emissions or tokenomics gimmicks.
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So the next time you look at a new crypto project, don't just look at the price, look at
the supply, look at the market cap, check if the minting contract was burned, ask yourself
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where does the value come from?
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If the answer is a printer,
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Be careful, if the answer is real value from on-chain activity, you may have found
something pretty special.
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Thanks for watching this episode of Unwrapped.
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If you found this breakdown helpful, hit that subscribe button and check out the other
deep dives and our conversations with builders in the crypto space.
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Class is dismissed and I'll see you on the next one.
