Understanding and Using a Tokenomics Calculator

Space and Time added Space and Tokens, formerly Cenit Finance, to the SXT product suite in August 2024. Space and Tokens is a cutting-edge tokenomics platform designed to help protocols optimize their token utilities and distribution strategies. With this integration, protocols can simulate tokenomics, better anticipate token performance and market risks, and build comprehensive analytics and dashboards around their token economy, all powered by SXT's verified onchain data. This content was originally published on the Cenit Finance website.

Thinking about creating your own token economy? You probably have many questions already sorted. What is the utility of my token? What kind of mechanisms and incentives should I include? How should I distribute the tokens and set the initial TGE price? It's a great resource for your first steps on building your Token Economy in 2024. Once you have some initial ideas, the next big question is: 'Are my tokenomics robust enough?' To answer this, you need more than just ideas, you need to test them out. That's where our Tokenomics Calculator comes in. It's a practical tool to check if your tokenomics is solid and ready to face real-world challenges.

What is a Tokenomics Calculator?

A tokenomics calculator is a tool that helps users to simulate and understand the economics behind their token economy. It's essentially a platform where you can experiment and visualize how your economy might evolve over time. A tool designed to analyze and visualize the evolution of your economy and be able to test how different factors will change your economic dynamics, so that you can understand and assess the potential growth of their economy and the value accrual of their token.

Create your own in-depth tokenomics simulations and get valuable insights in less than 15 minutes with the Space and Tokens Token Calculator tool

How does it work?

Designing tokenomics is a two-step journey. First, you plan how your economy will function and what makes it valuable - this is what we call Tokenomics Design. Following that, you enter the phase of Tokenomics Simulation, where you continuously refine and test your design to achieve the optimal setup. Advanced tools like our Space and Tokens Finance Token Calculator use a technique known as agent-based simulation that is based in two principles: 1) 'agents', who are the key players in your economy, like users and investors, and 2) the ‘environment', which includes all the rules and options in your economy.

In our tool, you start out by filling in a form with the information of your tokenomics, including things like allocations, vesting schedules, utilities, and incentives. Once filled in, we automatically translate your inputs into an agent-based simulation of your token economy and create an interactive dashboard in which you can analyze the results or run new simulations with different input parameters.

The goal of our calculator is to give you a full preview of your economy, so that you can understand ahead of time how it might work in the real world. You can try out different ideas and make changes before you show it to your community or investors. It's an important step to make sure your token economy is strong, practical, and ready to be launched.

Let's take a look at an example:

Tokenomics Design

Let's start by defining the different key elements of designing your tokenomics. When using our Tokenomics Calculator, you'll follow these crucial steps to shape the backbone of your token:

1. General Information
2. Token Allocation
3. Value propositions and it’s growth
4. Incentivization
5. Behaviour Hypotheses

1. General Information

Here you will input essential information such as the name of your project, the initial price of your token, the total number of tokens available, and whether your token will have governance capabilities.

2. Token Allocation

Next step is setting up how your tokens will be distributed. This involves two aspects: (1) who gets which percentage of the token allocation, such as your various stakeholders, the treasury, market makers, on incentives reserves; and (2) when do the tokens unlock for them (the vesting schedule). You will get some nice visualizations of this allocation and vesting schedule as you add the information.

3. Value proposition

Here, you will define the value proposition or propositions of your protocol or business, and how they interact with the token through different possible token utilities. For example, if you are a DEX, you might want to assign a percentage of your protocol fees towards users who stake your native token. Or, if you are a gaming platform, you might offer special discounts or perks for users who hold a certain amount of token. In this section, you will set up these utilities for the token, as well as the growth trajectory of the value propositions they are associated with.

With our tool, you have the flexibility to create multiple economic value propositions tailored to various types of operations and services. This includes, but is not limited to, designing tokenomics for decentralized exchanges (DEX), lending platforms, derivatives exchanges, liquid staking protocols, Infrastructure protocol, GameFi applications, and decentralized applications (dApps). You can even define a custom value proposition to fit any unique business model.

4. Incentives

In this step, you define  which aspects of your economy you wish to incentivize. This will depend on your project's nature - incentivizing operators in a staking protocol, rewarding liquidity providers in a DEX, etc. You also have the option to introduce new token emissions as temporary incentives for specific parts of your economy.

5. Behavior Hypothesis

Finally, you'll hypothesize about how users might interact with your economy. This involves forecasting treasury expenses, estimating the selling patterns of the various stakeholders, or the behavior of your token stakers. Don’t worry if you are not too sure about these values. You will be able to easily alter these hypotheses and test out different scenarios once you have the simulation dashboard.

Once you've navigated these steps and filled in all the necessary information, simply click “Update simulation”. You're now ready to see a dynamic simulation of your carefully designed token economy.

Tokenomics Simulator

With the Tokenomics Simulator now set up, you've got a powerful tool customized to your unique token economy showcasing the results of the simulation. It's flexible and visual, allowing you to experiment and modify various aspects, from the foundational design elements of your protocol to its growth predictions.

As an example, we’ve filled in the form from the previous section with the data of a lending protocol. Within seconds, we have our simulation dashboard ready, in which you can test out a variety of scenarios: adjusting transaction volumes, playing with different fee percentages, altering staker benefits, or seeing the effects of offering discounts for token payments. It's also possible to experiment with various vesting schedules for your investors and stakeholders. Check it out on the following link:

As you'll see in the image below, our tool provides a comprehensive range of options for you to fine-tune and tailor your economy to test it in a real world scenario.

But our simulator isn’t just for lending protocols. You can explore and test various models including:

• Decentralized Exchange (DEX)
• Derivatives Trading protocols
• Liquid Staking protocols
• Infrastructure protocols
• GameFi applications
• Decentralized applications (dApps)
• Custom models tailored to your unique concepts

This simulator is a go-to resource for understanding the strengths and vulnerabilities of your economy. It's designed to show you how your tokenomics would perform under different conditions, helping you identify when your economy is working and when it might face challenges.