How to Identify and Improve Poor Tokenomics Methods
Poor tokenomics are a primary reason for token failure, often stemming from flawed supply, distribution, or utility design. This guide outlines the most common mistakes in token design and provides a clear framework for fixing them. A well-structured token model can build lasting community trust and project sustainability.
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The Problem
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The Solution
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The Most Common Poor Tokenomics Methods
Recognizing flawed design is the first step toward improvement. Here are the frequent culprits behind token failure.
Many projects launch with an unlimited or excessively large supply, leading to immediate and continuous sell pressure. Others have concentrated initial distributions where a handful of wallets control most tokens, creating centralization and rug-pull risk. A token with no defined utility or burning mechanism becomes a speculative asset with no underlying value. Finally, lack of sustainable revenue for creators forces them to exit liquidity early, abandoning the project. Understanding these patterns is key to building something better.
- Uncapped/Excessive Supply: Creates permanent inflation, diluting holder value.
- Concentrated Distribution: >40% of supply to team/VCs without locks creates sell risk.
- Zero Utility: Token serves no function within a product or ecosystem.
- No Revenue Model: Creators earn nothing, incentivizing a quick exit over building.
Step-by-Step: How to Fix Supply and Distribution
A methodical approach to restructuring your token's core economics.
Correcting foundational flaws requires deliberate action. Follow these steps to rebuild trust.
Step 1: Audit and Define Total Supply. Decide on a fixed, reasonable maximum. For a community token, 1 billion or less is typical. Use a smart contract to enforce the cap.
Step 2: Structure a Fair Launch. Allocate a majority of tokens to the public sale and liquidity pools. Limit team/advisor allocations to 20% or less, and enforce vesting schedules (e.g., 12-24 months).
Step 3: Implement Holder Incentives. Design a system that rewards people for holding. This could be a share of transaction fees, governance rights, or access to exclusive features. Platforms like Spawned build this in with a 0.30% ongoing reward to holders from every trade.
Step 4: Plan for Long-Term Sustainability. Consider how the project will fund itself. A small, perpetual fee (like the 1% post-graduation fee via Token-2022) can fund development without relying on constant token sales.
Poor Design vs. Improved Design: A Side-by-Side Look
See the tangible differences between flawed and fixed token models.
Contrasting the old ways with better practices makes the upgrade path clear.
| Aspect | Poor Tokenomics Method | Improved Tokenomics Method |
|---|---|---|
| Creator Revenue | 0% fee. Creator must sell tokens to profit, causing price dumps. | 0.30% fee per trade. Creates a sustainable income stream aligned with trading volume. |
| Holder Value | No ongoing rewards; value relies purely on speculation. | 0.30% reward to holders per trade, directly incentivizing long-term holding. |
| Post-Launch Fees | Not possible with standard token programs; no future funding. | 1% customizable fee possible via Token-2022 program after graduation for ongoing development. |
| Project Funding | Relies on initial raise; often leads to abandoned projects. | Built-in fees support marketing, development, and community initiatives continuously. |
This comparison shows that integrating sustainable economics from the start creates a healthier project ecosystem.
Why a 0.30% Creator Fee is Better Than 0%
The '0% fee' model is often marketed as a benefit, but it creates a fatal misalignment. With no fee, the project creator's only way to earn is to sell their own token holdings. This directly conflicts with the community's desire for the price to increase and leads to inevitable sell pressure.
A 0.30% fee on every trade, as implemented on Spawned, changes this dynamic. It provides the creator with a small, consistent revenue stream tied to the token's usage and success. If the community trades more, the creator earns more, aligning their incentives with fostering an active, liquid market. This model funds ongoing work without forcing the creator to become a net seller. It turns the creator into a permanent stakeholder, not an exit liquidity seeker. For holders, this alignment builds significant trust, which is foundational for any token's long-term viability.
Final Verdict: How to Truly Improve Tokenomics
The essential principles for moving from a flawed token to a sustainable one.
Improving poor tokenomics isn't about complex tricks; it's about adopting transparent, sustainable, and aligned economic structures.
The most effective path is to launch with fair supply, distributed ownership, and built-in utility. Crucially, integrate a reasonable creator fee (like 0.30%) and holder rewards from day one. This funds development and rewards your community simultaneously, creating a positive feedback loop. Using a launchpad that supports advanced features like Solana's Token-2022 program future-proofs your token, allowing for adaptable fee structures post-launch.
Recommendation: Avoid shortcuts and 'get-rich-quick' models. Build your token with the same care as your product. Choose a launch platform that provides the tools for sustainable economics, not just a quick mint. The goal is to create a token that lasts, not just one that launches.
Ready to Launch with Improved Tokenomics?
If you're planning a token and want to avoid the common pitfalls of poor tokenomics, Spawned is built for you. We provide the framework for sustainable token design from the start.
- Launch with built-in sustainability: A 0.30% creator fee and 0.30% holder reward are configured automatically.
- Plan for the future: Graduate to Solana's Token-2022 program to enable a 1% perpetual fee model.
- Save on essential tools: Our included AI website builder eliminates a $29-99/month cost for presenting your project.
Start with a clear, fair structure. Launch your token on Spawned for a 0.1 SOL fee and build a project designed to last.
Related Topics
Frequently Asked Questions
The most damaging mistake is creating a token with no utility or reason to hold it long-term. This turns the token into a purely speculative asset, where the only way for early entrants to profit is to sell to later buyers. This 'greater fool' dynamic inevitably collapses. A token must have a defined use case, whether for governance, access, fees, or rewards within an ecosystem.
It is very difficult to change core parameters like total supply or fee structures after launch without migrating to a new token contract, which requires full community trust and participation. This is why planning with future-proof tools is critical. Using Solana's Token-2022 program at launch, for example, allows you to enable features like transfer fees later on without a full migration.
No, 0.30% is a standard and sustainable rate. Compared to a 0% fee, it provides essential project funding without creating excessive friction for traders. For context, many decentralized exchanges charge 0.30% trading fees. This fee aligns the creator's success with the token's trading volume, incentivizing them to build utility and community rather than exit their holdings.
Holder rewards are distributed automatically from a portion of the trading fees. On Spawned, 0.30% of every trade is allocated to a reward pool. This pool is then distributed proportionally to all token holders based on their balance. This mechanism directly rewards users for holding the token, reducing sell pressure and encouraging long-term participation in the project's ecosystem.
Solana's Token-2022 program is an upgrade to the standard token program. Its key benefit for tokenomics is enabling **transfer fees**. This allows a project to implement a small, configurable fee (e.g., 1%) on every token transfer post-launch. This creates a perpetual, decentralized revenue stream for treasury funding, buybacks, or holder dividends, solving the long-term sustainability problem many tokens face.
For gaming tokens, poor tokenomics can kill the in-game economy. An inflationary token with no sinks leads to rampant inflation, making earned rewards worthless. A fair launch with capped supply, integrated burn mechanisms for in-game items, and utility for purchasing assets or accessing content is essential. See our guides on [how to create a gaming token on Solana](/use-cases/token/how-to-create-gaming-token-on-solana) for chain-specific best practices.
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