What is the Token Economics of ADA?
What is the Token Economics of ADA?
This post covers the token economics of ADA, the native token of the Cardano blockchain.
Token economics (tokenomics) studies the design and implementation of blockchain-based tokens. Understanding token economics is crucial for anyone considering investing in or using a particular token.
This post covers the token economics of ADA, the native token of the Cardano blockchain.
1. Issuance & Emission
Token issuance is the creation and distribution of tokens as part of a specific event or offering e.g. airdrop, ICO, reverse ICO, IEO, IDO, DAICO, ETO, STO, and SAFT. Token emission is the ongoing process of creating and releasing new tokens into circulation e.g. through mining or staking.
ADA is a decreasing issuance token with a maximum supply of 45 billion.
Cardano distributed vouchers for 25.9 billion ADA in 4 tranches of a public sale (Sep 2015 to Jan 2017). These vouchers were redeemable for ADA through the Daedalus wallet.
The ADA vouchers were sold by a Japanese corporation in Bitcoin or by Yen converted into Bitcoin.
The genesis block distribution included 5.2 billion ADA that was sent to 3 entities of the Cardano ecosystem:
Cardano Foundation, the owner of the Cardano brand.
EMURGO, the for-profit arm of Cardano.
IOHK, which is contracted to design, build, and maintain the Cardano platform.
2. Utility
Tokens derive value from the utility of the network that they are used in. In other words, the value of a token is determined by how useful it is within the specific ecosystem in which it is used. This can be based on a variety of factors, such as:
the size and activity of the network,
the demand for the goods & services that can be purchased with the token, and
the perceived value of the network to its users.
As the utility of the network increases, the value of its associated tokens is likely to increase as well.
Use cases of ADA:
ADA is the native token of the Cardano blockchain and can be used to pay transaction fees. Interestingly, fees do not go directly to the block producer. They are pooled & distributed to all pools that created blocks during an epoch.
ADA is a digital currency that can be used as a global medium of exchange.
ADA can be delegated to a stake pool to earn rewards.
ADA can be pledged to a stake pool to increase the pool's likelihood of receiving rewards.