Token Design
ERC-20 Tokenomics: Designing Your Token's Economics
Total supply, allocation splits, vesting schedules, and inflation choices for new ERC-20 tokens. Plain-English principles, not whitepaper jargon.
The short version: Decide your total supply, split it across liquidity, community, treasury, and team. Lock liquidity. Vest team tokens. Default to fixed supply. The rest is calibration.
In this guide
1. Choosing Total Supply
Total supply is the number of tokens that will ever exist. The number is mostly cosmetic - what matters is market cap (supply multiplied by price). A 1M-supply token at $10 and a 10B-supply token at $0.001 are both $10M projects. But supply influences perception:
| Supply range | Token type it fits | Perception |
|---|---|---|
| 1,000 to 100,000 | Premium utility, governance with quorum | "Each token feels valuable" |
| 1M to 100M | Utility tokens, DeFi protocols | Balanced, professional |
| 1B | Ecosystem tokens, mid-cap launches | Standard, easy to reason about |
| 1T+ | Memecoins, viral launches | "Cheap per token" - good for retail psychology |
Memecoins favour huge supplies because the price-per-token looks dramatically cheap ($0.0000001 reads like upside even if the market cap is already $100M). Utility tokens favour smaller supplies because each unit feels like a meaningful share.
Pick a round number. 1B is the safest default for a serious launch. 1T is the safest default for a memecoin.
2. Allocation: Who Gets What
Once you have a supply, you split it between buckets. The five standard buckets:
Liquidity (typically 30 to 60%)
Tokens paired with ETH in a Uniswap pool. Lock the LP tokens for at least 6 months. This is what makes your token tradeable.
Community / airdrop (typically 10 to 30%)
Distributed to early supporters, airdrop recipients, or early buyers. Builds the holder base.
Treasury (typically 10 to 25%)
Held by the project for future grants, partnerships, exchange listings, or marketing. Multisig-controlled if serious.
Team (typically 5 to 15%)
For founders and core contributors. Always vested. Unvested team allocations are a red flag.
Marketing / partnerships (typically 0 to 10%)
Reserved for influencer deals, exchange market makers, paid promotions. Often comes out of treasury rather than being a separate bucket.
For a fair launch, you compress this to roughly 95% liquidity and 5% treasury (or 100% liquidity with no team allocation at all). For a professional VC-backed launch, you might see 20% liquidity, 30% community, 20% treasury, 20% team, 10% investors (each vested differently).
3. Vesting Schedules
Vesting locks team and investor tokens so they release gradually instead of all at once. Standard patterns:
| Pattern | Cliff | Release | Best for |
|---|---|---|---|
| 1-year cliff + 3-year linear | 12 months | Monthly over 36 months after cliff | Team founders |
| 6-month cliff + 2-year linear | 6 months | Monthly over 24 months | Advisors, early contributors |
| No cliff, 1-year linear | None | Monthly over 12 months | Marketing partners, KOLs |
| No vesting (immediate) | None | At launch | Liquidity, airdrops |
Vesting needs to be enforced on-chain. Manual "we'll just hold them, trust us" claims are worth nothing. Use a vesting contract like Sablier, OpenZeppelin VestingWallet, or a custom contract audited before deployment.
4. Fixed Supply vs Inflation vs Deflation
Fixed supply (default for ETHTokenLaunch)
The total supply is minted at deployment and no more can ever be created. Simplest model. Easiest for holders to reason about. ETHTokenLaunch's standard contract uses this model.
Inflationary
The contract can mint new tokens after deployment. Used to fund ongoing rewards (staking emissions, liquidity mining). Needs a credible "sink" so inflation doesn't just dilute holders.
Deflationary
Tokens are burned over time, reducing supply. Common patterns: burn a percentage of every transfer, periodic treasury buybacks-and-burns. Narrative-friendly but only meaningful if the burn rate is large.
Most successful new ERC-20 launches choose fixed supply. The other models add complexity that has to be justified by a real mechanism.
5. Liquidity Strategy
Without liquidity, your token is unsellable. The first three liquidity decisions:
- How much ETH to pair? The pool's initial ETH side determines starting price (token side / ETH side = price). 0.5 to 5 ETH is common for early launches. More ETH means less slippage but higher upfront capital.
- Lock for how long? Minimum 6 months. 12 months signals serious intent. 5+ years effectively permanent. Use Unicrypt or Team Finance.
- Uniswap V2 or V3? V2 for simplicity and meme-coin launches. V3 for concentrated liquidity (capital-efficient but harder to manage).
See our Uniswap listing guide for the deployment steps.
6. Worked Examples by Token Type
Memecoin (fair launch)
Total supply: 1,000,000,000,000 (1T). Allocation: 90% to Uniswap pool, 5% airdropped to early followers, 5% to treasury. Liquidity locked 1 year. No team allocation. No vesting. Renounced ownership. Optimised for: rapid community formation, no insider sell pressure.
Utility token (small project)
Total supply: 10,000,000 (10M). Allocation: 40% Uniswap pool (locked 1 year), 20% community rewards (released linearly over 12 months), 20% treasury (multisig, no vesting), 15% team (1-year cliff + 3-year linear), 5% advisors (6-month cliff + 2-year linear). Optimised for: longevity, credible team.
DAO governance token
Total supply: 100,000,000 (100M). Allocation: 50% to DAO treasury controlled by holder vote, 30% airdropped to historical protocol users, 15% to team (4-year vesting), 5% to liquidity. Inflation: 2% per year via DAO-approved rewards. Optimised for: legitimacy, decentralisation.
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