Tokenomics on Paper and in Reality: How to Evaluate a Project Before Buying a Token

Before buying a token, investors typically look at the price, chart, market cap, and the project’s prospects. But the price reflects the current situation. Tokenomics reveals another part of the picture: how many tokens exist, how many are already in circulation, who owns the rest, and when they might enter the market.

In August 2026, researchers Rem Sadykhov, Geoffrey Goodell, and Philip Treleaven published a paper titled “Methodology for Modelling Token Economies and Performing Event Impact Analysis with DeTEcT.” The authors propose viewing tokenomics not merely as a distribution table, but as an economic system whose behavior changes in response to various events.

Let’s try to apply this idea as simply as possible—without complex math and without using a real project, so that its name and reputation don’t influence the results. We’ll create our own token, KLJO, with a maximum supply of exactly 1 million tokens, and see how the same tokenomics plays out under different project development scenarios.

What Is Tokenomics?

Tokenomics defines the rules governing a token’s existence: its supply, distribution, issuance, unlocking, and economic incentives for participants.

For an initial analysis, it’s enough to understand a few key metrics. Max Supply is the maximum number of tokens that can exist. Circulating Supply is the number of tokens already in circulation. Market Cap is the value of the circulating supply. FDV (Fully Diluted Valuation) is the value of the maximum supply at the current price. Vesting determines the schedule for the team, investors, and other participants to receive tokens, while Token Unlock refers to the point at which previously locked tokens become available to their owners.

But these figures alone don't tell us anything about how sustainable the project's economy will be. So let's build a simple model.

Let's Create the KLJO Token

Let's introduce a new crypto project with a maximum supply of 1,000,000 KLJO. At launch, there are 200,000 tokens in circulation, and the market price is $1.

Indicator	Meaning
Max Supply	1,000,000 KLJO
Circulating Supply	200,000 KLJO
Price	$1
Market Cap	$200 000
FDV	$1 000 000

The math here is simple. 200,000 KLJO in circulation at a price of $1 results in a market cap of $200,000. If we value the entire maximum supply at the same price, the FDV is $1 million.

At first glance, the project seems small. With a market capitalization of just $200,000, it may seem like there’s enormous room for growth.

However, only 20% of the maximum supply is currently on the market.

So the next question is: where are the remaining 800,000 KLJO?

Checking the token distribution

Suppose a project team publishes the following tokenomics:

Distribution	KLJO	Share
Public Statement	200 000	20%
Team	200 000	20%
Early Investors	200 000	20%
Staking and Ecosystem Development	200 000	20%
Treasury	100 000	10%
Rewards, Bounties, and Community Activities	100 000	10%
Total	1 000 000	100%

Now, the initial market capitalization of $200,000 looks a little different. Only one-fifth of the maximum supply is in free circulation, while the remaining 80% is distributed among the team, investors, and various project funds.

Categories such as “Rewards,” “Community,” “Ecosystem,” “Bounty,” or “Incentives” deserve special attention. In a presentation, they appear much less controversial than the term “investors,” but from the perspective of the offering, they are still tokens. If they are distributed to users, developers, campaign participants, or liquidity providers, some of them may eventually end up on the market.

A large gap between market cap and FDV does not in itself make a project bad. It indicates something else: a significant portion of the potential supply is not yet in circulation.

Now we need to find out when it will be available.

Checking Vesting and Token Unlock

Let's assume that for the first year, the project publishes the following schedule:

Category	Will be available within the first year
Team	50,000 KLJO
Early Investors	100,000 KLJO
Staking and the Ecosystem	100,000 KLJO
Awards and Bounties	50,000 KLJO
Total	300,000 KLJO

The treasury remains frozen for the first year.

At launch, 200,000 KLJO are in circulation. During the first year, an additional 300,000 will become available to various participants in the economy.

Thus, the potential supply increases:

from 200,000 to 500,000 KLJO.

This represents an increase of 300,000 tokens, or 150% relative to the initial circulating supply.

At the end of the year, 50% of the Max Supply becomes potentially available.

But that doesn't necessarily mean that all 500,000 KLJO will actually end up on exchanges.

A token unlock is not the same as a sale

This is a fundamental difference.

If 50,000 KLJO have been unlocked for the team, it may continue to hold them. Investors may choose not to sell their 100,000. Rewards may be sent to staking, and ecosystem tokens may be used within the project.

"Unlock" refers to the ability to sell, not the actual sale itself.

But the economic situation is changing anyway. Before the tokens were unlocked, the owner physically could not send them to the market. After they were unlocked, he can.

That is precisely why a single vesting schedule is not enough. We need to understand whether the economy will be able to absorb a potentially increasing supply.

For simplicity, we will compare the new hypothetical demand with the number of new tokens available. This is not a model of future prices, but rather a stress test of the tokenomics.

Scenario No. 1: The project is proceeding as planned

Let's start with the best-case scenario. The product becomes popular, the number of users grows, new features are introduced, and KLJO is actually used within the ecosystem.

Let's say that in the first year, new demand amounts to, for example, 400,000 KLJO.

During the same period, 300,000 new tokens will become available.

Indicator	KLJO
New Conditional Demand	400 000
A New Affordable Offer	300 000
The Difference	+100 000

In this scenario, the economy appears to be stable. The growth in potential demand exceeds the supply of new tokens.

The project is growing, the economy is expanding, and the new listing is attracting a potential buyer...

Scenario #2: The project is up and running, but growth has stalled

Only one assumption has changed: the project turned out to be less popular than expected.

The product is up and running, and there are users, but the new potential demand is only 100,000 KLJO.

Indicator	KLJO
New Conditional Demand	100 000
A New Affordable Offer	300 000
The Difference	−200 000

We are looking at the same project and the same official tokenomics. However, the potential new supply now exceeds the hypothetical new demand by a factor of three.

It turned out that just one thing was enough to cause the problem: the project grew more slowly than expected.

Scenario No. 3: A bear market begins

Now let's add an external factor that the team has no control over.

The crypto market is entering a prolonged downturn. Speculative interest is waning, user activity is declining, and new capital is flowing in at a much slower pace.

The notional new demand for KLJO is decreasing to 50,000 tokens.

But the vesting schedule isn't affected by market conditions. 300,000 KLJO will become available over the course of the year regardless.

Indicator	KLJO
New Conditional Demand	50 000
A New Affordable Offer	300 000
The Difference	−250 000

Scenario No. 4: Early investors are given the opportunity to exit

There is another metric that often proves to be more important than the size of the token unlock itself: the entry price for early investors.

Let's say early investors received their KLJO tokens at $0.10 each. Over the course of the first year, 100,000 tokens become available to them.

The market price of KLJO at this point is $1.

For someone who bought a token for $1, a drop in price to $0.50 means losing half their investment.

For an early investor with an entry price of $0.10, selling at $0.50 still represents a fivefold return on the initial purchase price.

Let's not forget about rewards, bounties, and incentives

Let's return to another aspect of our tokenomics.

We have allocated 100,000 KLJO—10% of the total max supply—for rewards, bounties, and various community activities. We plan to distribute 50,000 in the first year.

It's easy to underestimate these categories. Tokens can be distributed for completing tasks, bug bounties, marketing campaigns, user acquisition, product development, or other activities.

For the project, these are costs associated with developing the ecosystem. For the recipient, this is an asset that was often obtained for free or as payment for work performed.

This means that his economic incentive is once again different from that of an investor who bought KLJO on the market with his own money.

Someone who receives 1,000 KLJO as a bounty can sell them for $0.30 or $0.50 and still make a real profit.

Therefore, when analyzing tokenomics , it is helpful to look beyond just the Team and Investors. Any category from which tokens are regularly transferred to new owners has the potential to increase the supply available to the market.

One tokenomics—three completely different economies

Script	New Conditional Demand	New KLJO Models Now Available	The Difference
The project is growing rapidly	400 000	300 000	+100 000
Growth has stalled	100 000	300 000	−200 000
Bear Market	50 000	300 000	−250 000

In all three cases, the Max Supply is 1 million KLJO. At launch, 200,000 are in circulation. Over the first year, an additional 300,000 become available. The distribution, vesting, and token unlock remain unchanged.

On paper, the tokenomics are exactly the same.

In reality, the outcome depends entirely on what happens after launch.

How to Check a Project's Tokenomics Before Buying

It’s best to start with Max Supply and Circulating Supply. If only a small portion of the maximum supply is on the market, you need to determine the status of the remaining tokens.

Next, compare the market cap and the FDV. A large gap indicates that a significant portion of the potential valuation is attributable to tokens that are not yet in circulation.

Next, review the token distribution. Look not only at “Team” and “Investors,” but also at “Ecosystem,” “Rewards,” “Treasury,” “Marketing,” “Airdrops,” “Bounty,” and “Incentives.” A fancy category name doesn’t change the fact that it contains real tokens.

The next stage is Vesting and Token Unlock. It’s important to compare the amount being unlocked with the current Circulating Supply. In our example, the 300,000 new KLJO tokens becoming available seem particularly significant precisely because only 200,000 are in circulation at the start.

It’s worth looking separately at the entry price of early investors. The lower it is compared to the market price, the more room there is to lock in profits even after a significant price drop.

Next, it’s important to understand the token’s utility and the source of demand. Why would a user buy KLJO? To pay for a product, fees, staking, or access to services—or simply because they hope to sell the token to the next buyer at a higher price?

Conclusion KLJO

Virtually every crypto project today will claim that its tokenomics have been carefully calculated. It will present the token distribution, vesting schedule, a multi-year unlock schedule, and a model of future demand.

You can set the Max Supply in advance. You can code the vesting schedule into a smart contract. You can know with near certainty how many tokens will be available in a year. But you cannot code into a smart contract the number of future buyers, the state of the crypto market, early investors’ desire to take profits, or users’ interest in the product three years from now.

As a result, long-term tokenomics inevitably begin to be based not only on numbers but also on assumptions.

And the most troubling part is that potential buyers are usually shown the most favorable set of these assumptions. Users join. The ecosystem grows. Demand increases. Rewards drive engagement. Unlocked tokens are absorbed by the growing market.

It’s much less common to see a second scenario: the number of users turned out to be four times smaller, the market has been declining for the second year in a row, demand has virtually disappeared, the team continues to receive tokens, investors have waited for the tokens to unlock, and participants in bounty and incentive programs are selling the assets they’ve received because, for them, this isn’t an investment but rather earned compensation.

Therefore, before buying a token, it’s helpful to do the opposite of what a project presentation usually does: don’t try to prove why the tokenomics should work. Try to break it.

Cut the expected demand in half. Then cut it in half again. Halt user growth. Add a bear market. Calculate the returns for early investors if the price drops by 50%. See how many tokens the team, investors, stakers, and bounty participants will receive over the next year.

If the business model still looks viable after that, you're looking at a truly interesting project.

Source

Sadykhov, R., Goodell, G., and Treleaven, P. “Methodology for Modeling Token Economies and Performing Event Impact Analysis with DeTEcT.”