Economic Architecture

Definition ∞ Economic architecture refers to the fundamental design and structural elements that govern economic activity within a system. In digital assets, this includes the rules, incentives, and mechanisms that influence how value is created, distributed, and exchanged. It determines the behavior of participants and the overall stability and growth of the digital economy. This framework shapes the monetary policy and resource allocation within a protocol.
Context ∞ Discussions around economic architecture are vital for understanding the long-term viability and utility of various cryptocurrencies and decentralized applications. News often analyzes tokenomics, which is a component of economic architecture, to assess a project’s potential for sustained value. Flaws in a system’s economic design can lead to instability or concentrated power, making it a critical aspect for investors and users to consider.