With legalisation spreading across the globe, more and more medical cannabis companies are looking for efficient ways to raise funds, manage supply chains, and reach customers without facing financial restrictions.
Enter, blockchain technology.
Understanding the tokenomics or economic structures of cryptocurrencies is essential for cannabis companies venturing into this space.
In this beginner’s guide, we provide an introduction to tokenomics, explaining key concepts like tokens, utility, scarcity, supply and incentives. We also explore popular token standards used in the cannabis industry like ERC-20 and equity tokens. This article aims to help cannabis entrepreneurs understand the potential of blockchain tokenisation. Once you’re finished reading, you should have a top-level understanding of our very own Tokenomics.
Introduction to Tokenomics
Tokenomics refers to the study of the economic structures and incentive mechanisms in cryptocurrency networks. At its core, a cryptocurrency network relies on digital tokens that are issued and distributed to participants according to predefined rules. The tokenomics defines how these tokens are created, priced, traded and utilised within the network.
Well-designed tokenomics aligns the incentives of different network participants like miners, stakers, developers and users to contribute value and maintain network security. The goal is to create an economically sustainable ecosystem around a cryptocurrency protocol.
Key Elements of Tokenomics
Here are some key elements that constitute the tokenomics of a cryptocurrency:
- Tokens – The native digital assets or coins like Bitcoin, Ether etc. that have value and can be owned or transferred between participants.
- Utility – The functions that tokens enable on their networks. Eg. Bitcoin enables peer-to-peer payments while Ether powers smart contracts on Ethereum.
- Scarcity – Having a limited supply and controlled release of new tokens promotes value. Bitcoin has a hard cap of 21 million tokens.
- Supply Schedule – The rate at which new tokens are created and released into circulation impacts prices. Some use fixed schedules while others adjust dynamically.
- Incentives – Effective token distributions provide incentives for different behaviours like mining, staking and governance which contribute to the network.
- Staking – Allowing token holders to stake their coins to help validate transactions and secure the network in return for rewards.
Token Standards in the Cannabis Industry
Many cannabis companies are using popular token standards like ERC-20 to launch branded cryptocurrencies or tokens on Ethereum. Meanwhile, equity tokens represent ownership shares in cannabis companies in a more regulated manner.
- ERC-20 – The ERC-20 standard provides a template for creating fungible, transferable tokens on Ethereum.
- Equity Tokens – These tokens represent ownership shares in cannabis companies. Tokenised equity enables fractional ownership and global access to investments normally limited by geography and regulation.
The economics of cryptocurrency networks offer innovative ways for cannabis enterprises to raise capital, build transparent supply chains and reach new markets. As the industry matures, purpose-built tokenised ecosystems will help the medicinal cannabis sector unlock greater efficiency and value for all participants.
If you’re reading this and think that the Ecoinomy project could benefit your business, or would like to understand more about implementing blockchain technology within the medical cannabis space please get in touch with a member of our team. Alternatively, head over to our Tokenomics page and give ours a read!
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Dr Tod Mikuriya’s list
Dr. Tod Mikuriya was a pioneering psychiatrist who spent his career researching and advocating for the medical use of cannabis. Through his work, Dr. Mikuriya treated over 9,000 patients with cannabis and maintained a list of more than 200 ailments
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