Designing tokenomics: the basics

Tokenomics is the set of economic rules that govern a token: how many exist, how they are distributed, what they are used for and what incentives they create over time. It is the part that decides whether a blockchain project holds up or deflates after a few months. Designing it well means aligning the interests of those who build, those who invest and those who use the network. Designing it badly means creating selling pressure and mistrust.

The questions to answer

Before talking about numbers, tokenomics must answer a few fundamental questions:

• What is the token for? Governance, access to a service, payment of fees, incentives for contributors. A token without a clear function is merely a speculative instrument.
• Why should it retain value? There must be real demand tied to use, not just to speculation.
• Who receives it, when and under what conditions? This is the part that causes the most problems when neglected.

The four pillars

1. Supply

Define the maximum supply and the issuance model: fixed (an unchangeable cap), inflationary (continuous new issuance to reward participants) or deflationary (“burn” mechanisms that reduce the supply). Each choice has opposite effects on perceived scarcity and on incentives. There is no single best model: it depends on the token’s function.

2. Allocation

How the total is split among team, investors, project treasury, community and incentives. An allocation too heavily skewed towards team and investors signals risk; one too generous in incentives risks leaving no resources for development. Transparency on distribution is today a minimum reputational requirement.

3. Utility

This is the reason someone wants to hold or use the token: paying fees, accessing features, participating in governance, earning rewards for a real contribution. Without utility, demand depends solely on the expectation of reselling at a higher price — and that mechanism, sooner or later, jams.

4. Vesting and incentives

Team and investor tokens must be subject to vesting: gradual release over time, often with an initial lock-up period (cliff). It serves to avoid mass selling at listing and to keep interests aligned over the long term. Watch the unlock schedule: concentrations of unlocks generate predictable selling pressure.

The most common mistakes

• Designing the tokenomics after the product, as a fundraising tool, rather than as part of the economic model.
• Incentives that reward unproductive activity and vanish as soon as the rewards end.
• Unlocks that are too fast for team and investors.
• No link between growth in network usage and the token’s value.

The Swiss perspective

In Switzerland, designing a token is not merely an economic exercise: the legal classification (payment, utility or asset token) affects regulatory and tax aspects and must be decided from the outset, because it shapes corporate structure, documentation and obligations. Some activities linked to the issuance or movement of assets may fall within areas subject to authorisation or to AML safeguards: in such cases the regulated activities are carried out through authorised partners, while the advisor’s role is the structuring and advisory on model, governance and tax consistency.

How we work

SIH ONE supports projects in structuring the tokenomics, classifying the token and setting up the corporate, tax and AML aspects, with the authorised activities handled through licensed partners. If you are designing a token, let’s talk with our crypto desk.