Tokenomics and Digital Assets Flashcards
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Read the first 7 Tokenomics and Digital Assets flashcards as text
In a Decentralized Autonomous Organization (DAO), how are protocol decisions typically made?
Answer: Through token-weighted voting by governance token holders submitting and approving proposals
DAOs use governance tokens to enable token-weighted voting, where holders submit proposals and vote proportionally, distributing decision-making authority across the community without centralized control.
What property makes non-fungible tokens (NFTs) fundamentally different from fungible tokens like Bitcoin?
Answer: Each NFT contains unique metadata and a distinct token ID making it non-interchangeable with any other token
NFTs are unique digital assets with distinct metadata and token IDs, making each one non-interchangeable, unlike fungible tokens where every unit is identical and mutually replaceable.
What is a 'wrapped token' in blockchain ecosystems?
Answer: A tokenized representation of another cryptocurrency, pegged 1:1 to the original, enabling cross-chain use
A wrapped token (e.g., Wrapped Bitcoin/WBTC) is a tokenized representation of another cryptocurrency locked in a custodian, pegged 1:1 to the original asset, allowing it to function on a different blockchain network.
What is a 'deflationary' token model designed to achieve over time?
Answer: Reduce circulating token supply through mechanisms like fee burning to create scarcity and potential value appreciation
A deflationary token model intentionally reduces circulating supply over time through mechanisms like burning a portion of transaction fees, creating scarcity that may support or increase token value.
What is a liquidity pool in the context of decentralized exchanges (DEXs)?
Answer: A smart contract holding paired token reserves that enables automated trading without traditional order books
Liquidity pools are smart contracts containing reserves of paired tokens that enable automated market makers (AMMs) to quote prices and execute trades without requiring a matching buyer and seller.
What is an Initial DEX Offering (IDO) and how does it differ from an ICO?
Answer: An IDO is a token launch conducted on a decentralized exchange providing immediate on-chain liquidity, unlike ICOs which use centralized platforms
An IDO launches tokens directly on a decentralized exchange, providing immediate trading liquidity from day one and eliminating centralized intermediaries, unlike ICOs which rely on centralized platforms and may have delayed exchange listings.
What does a token's 'velocity' measure in tokenomics analysis?
Answer: How frequently a token is spent or transferred rather than held, which can affect its store-of-value properties
Token velocity measures how frequently a token changes hands; high velocity means tokens are quickly spent or traded rather than held, which can reduce the token's utility as a store of value and dampen price appreciation.