Tokenomics 101: The Basics of Evaluating Cryptocurrencies - DeFriday #19

That means 90% of the supply is already in circulation, and here will only be 10.5% more bitcoin 100 years from now, so you shouldn’t expect any serious inflationary pressure bringing down the value of the coin. 

Based on supply alone, should I expect this token to hold or increase its value? Or will that value be inflated away?

ROI in this case is not how much you think the token price will go up. It’s how much income or cash flow the token is able to generate for you simply by holding it.

For example, if you hold Ether you can stake it to help secure the network once Proof of Stake launches. In return for Staking your ETH, you get paid in more ETH, at a rate of about 5%.

Some tokens allow you to tap into the earnings of the protocol they represent. If you hold SUSHI, you can stake it to earn a share of the Sushi protocol revenues, currently for about a 10.5% APR.

So while it’s tempting to be purely analytical, don’t discount how far a token can get with faith, clever memes, and a cult-like following. 

Another form of ROI comes from “rebasing,” similar to a stock split where by holding a token and staking it, you continue to get more of that token as the protocol inflates its supply. This is how Olympus works and is why their heavy inflation rate is not necessarily a bad thing since you can retain the share of the protocol that you own. 

What about Ethereum? The circulating supply is around 118,000,000, and there’s no cap on how many Ether can exist. But Ethereum’s net emissions were recently adjusted via a burn mechanism so that it would reach a stable supply, or potentially even be deflationary, resulting in somewhere between 100-120m tokens total. Given that, we shouldn’t expect... See more

There will only ever be 21,000,000 bitcoin, and they’re released at a rate that gets cut in half every four years or so. Roughly 19,000,000 already exist, so there are only 2,000,000 more to be released over the next 120 years.