Definition ∞ Tokenomics and supply collectively describe the economic principles governing a digital asset and its total available quantity. Tokenomics encompasses the design of a token’s utility, distribution, incentive structures, and governance mechanisms, while supply refers to the total number of tokens in existence and how they enter or leave circulation. These elements dictate an asset’s scarcity, value proposition, and how participants are incentivized to interact with the underlying protocol. They are foundational to a digital asset’s economic viability and market behavior.
Context ∞ Understanding tokenomics and supply is essential for evaluating the long-term potential and risks associated with any digital asset project. Market participants and analysts closely examine these factors for insights into an asset’s inflationary or deflationary nature and its capacity to sustain network activity. Debates often focus on designing optimal tokenomics to foster network growth, security, and decentralized governance.
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