Understanding tokenomics
Supply, market cap, FDV, vesting and unlocks explained, and how to look them up on CryptoRank.
What is tokenomics?
"Tokenomics" (token economics) describes how a cryptocurrency's supply works: how many tokens exist, how many will exist in future, who owns them, and when they can be sold. Two coins with the same price can be very different propositions once you look at their tokenomics, so it is one of the most useful things a normal person can check before buying.
Three kinds of supply
- Circulating supply: the tokens that are actually available to trade right now.
- Total supply: all tokens that have been created so far, minus any that have been permanently destroyed ("burned"). This includes tokens that are still locked up for the team or investors.
- Max supply: the most that can ever exist, if the project has a cap. Bitcoin's is 21 million. Some coins, including ether, have no fixed maximum.
A large gap between circulating supply and total or max supply means many more tokens could reach the market in future.
Market cap versus FDV
- Market capitalisation = price × circulating supply. This is the figure most websites rank coins by.
- Fully diluted valuation (FDV) = price × max supply (or total supply if there is no max). It shows what the project would be "worth" at today's price if every token were already in circulation.
Example: a token trades at £1. 100 million are circulating, but the max supply is 1 billion. Its market cap is £100 million, but its FDV is £1 billion. For the price merely to stay at £1 as the other 900 million tokens are released, buyers would need to absorb ten times as much supply. A low market cap with a very high FDV is a common warning sign.
Allocation: who owns the tokens?
Projects usually divide their supply between groups such as:
- the team and advisers
- early investors and venture capital funds
- the community (airdrops, rewards, ecosystem grants)
- a treasury or foundation
- public sale buyers
Check what share goes to insiders (team plus investors). If insiders hold a large proportion and bought far below today's price, they may have a strong incentive to sell when they are allowed to.
Vesting, cliffs and unlocks
Insider tokens are normally locked and released gradually. This is called vesting.
- TGE (token generation event): the day tokens are first created, often the day they start trading.
- Cliff: an initial period after TGE during which nothing unlocks.
- Linear vesting: tokens unlock evenly (daily, monthly or quarterly) after the cliff.
- Unlock: the moment a batch of locked tokens becomes free to sell.
Large unlocks, measured as a percentage of market cap, add new supply that can pressure the price, particularly if the recipients bought cheaply. Unlocks are public and scheduled, so markets often price them in beforehand, but they are still worth knowing about.
Inflation and burns
Many networks create new tokens continually as rewards for validators, stakers or users. This is token inflation and, like inflation in pounds, it dilutes existing holders unless demand grows to match. Some projects also burn tokens (for example, part of every transaction fee) which reduces supply. Ask: what is the yearly inflation rate, and is real usage growing faster?
How to research tokenomics on CryptoRank
CryptoRank is a free-to-browse data site that is particularly strong on unlocks, vesting and fundraising. Some detailed data requires a free account or paid plan.
- Search for the coin using the search bar, then open its page. The overview shows price, market cap, FDV and circulating, total and max supply.
- Open the Vesting tab on the coin's page (for example, Arbitrum's vesting page). It shows the allocation table (each group's share and how much is unlocked or still locked), the vesting schedule chart, and a countdown to the next unlock.
- Check the token unlock calendar at cryptorank.io/token-unlock for upcoming unlocks across the market, shown with their size as a percentage of market cap.
- Look at fundraising data for the project, if listed: which funds invested, how much, and at what stage. Early investors who paid a fraction of today's price are the ones most likely to sell at unlock.
- Cross-check figures with the project's own documentation. CryptoRank links to vesting sources where available, and its data, like any aggregator's, can be incomplete or out of date.
A quick tokenomics checklist
- What percentage of max supply is circulating?
- How big is the gap between market cap and FDV?
- What share is held by the team and investors, and when does it unlock?
- When is the next large unlock, as a percentage of market cap?
- Is there ongoing inflation, and what is it paying for?
Good tokenomics do not make a project a good investment, and poor tokenomics do not guarantee a price fall. They are one piece of research among many. This guide is for education only and is not financial advice.