Separate valuation arithmetic from price forecasts
By the end, explain the diagram in your own words, solve the case and justify the correction.
Prerequisites : What is a blockchain?
Level 2 · Intermediate →Reading path · 35 / 35 · Intermediate
Tokenomics describes issuance, distribution, incentives and rights.
The essentials
Tokenomics describes issuance, distribution, incentives and rights. Start by distinguishing circulating supply, total issued supply and a maximum supply when one exists. Data providers may use different circulation definitions, so a comparison needs a consistent basis and observation date.
How it works
Market capitalisation multiplies price by circulating units. Fully diluted valuation applies the price to a broader supply assumption, often the maximum or total supply. Read the chosen definition. Neither number is a pool of cash available to holders, and neither tells you how much could be sold without moving the market.
What to watch
An unlock changes restrictions on existing allocations; issuance creates units; burning removes units under protocol rules. These events can overlap but are not synonymous. Identify beneficiaries, dates, conditions and governance powers. Released tokens are not necessarily sold immediately.
Understand the details
Construct a supply bridge from opening units through issuance and burns to closing units, then track the subset considered circulating. A vesting schedule changes availability and incentives, but price also depends on demand, liquidity and expectations. Run scenarios with explicit supply and price assumptions rather than treating an unlock percentage as an automatic percentage price fall.
Boundaries and common mistakes
A maximum supply may be absent or subject to governance. FDV comparisons can mislead when their denominators differ.
The mechanism at a glance
- Define supply
- Map allocations
- Model unlocks
- State valuation assumptions
Apply the lesson to a case
A fictional token costs €2, has 10 million circulating units and a stated maximum of 50 million. Calculate current market cap and maximum-supply FDV at that unchanged price.
2 × 10 million = 20 million; 2 × 50 million = 100 million. These are valuations under a fixed-price assumption, not cash balances or forecasts.
Prepare a correction note
Describe the passage and the proposed correction. This creates a local note for you to share; it sends nothing. Do not include personal or confidential information.