What is a Token Distribution Model?
A token distribution model is a framework that outlines how tokens will be allocated among various stakeholders in a blockchain ecosystem. This model is crucial in defining the economic structure of a cryptocurrency or blockchain project.
Key Components
- Initial Supply: Refers to the total number of tokens created at launch.
- Circulating Supply: The number of tokens actively available for trading in the market.
- Distribution Strategy: The method for allocating tokens among investors, developers, partners, and the community.
- Vesting Period: A predetermined timeframe during which certain stakeholders cannot sell their tokens to ensure stability.
Types of Models
Token distribution models can vary widely. Common approaches include:
- ICO (Initial Coin Offering): Raising funds by selling tokens to early investors.
- Airdrops: Free distribution of tokens to raise awareness or incentivize usage.
- Staking Rewards: Rewarding users who lock their tokens in the network.
Importance
A well-defined token distribution model can influence the project’s sustainability, community engagement, and overall success. Transparency and fairness in this process foster trust and promote user participation.