Defining Token Supply and Pricing Strategy
Issuers must carefully define both the number of tokens to be issued and the price per token, as these two variables determine the offering’s valuation, fundraising capacity, investor onboarding experience, and alignment with market expectations.
This article outlines best practices for calculating token supply, choosing pricing models, and aligning fundraising targets with your tokenization and business model.
Objective
Ensure that the token supply, price per token, and fundraising goal align with the total asset value, investor expectations, and the issuer's strategic intent.
This includes:
Setting a logical, intuitive token price (e.g., $0.10 or $1.00)
Calculating total token supply based on valuation
Aligning with the percentage of ownership offered
Defining issuance mechanics (e.g., pre-minted vs. dynamic minting)
Token Supply Strategy
Key Inputs:
Total asset/project valuation (e.g., $10M real estate or funding round)
% of the value being tokenized (e.g., 60% of project equity)
Target price per token (e.g., $0.10, $1, 1 sqft per token)
Issuance structure (e.g., mint all upfront or mint-on-demand)
Common Token Supply Models
Standardized Low-Value
$0.10 per token
$10 million fundraising → 100 million tokens issued
1-to-1 Dollar Model
$1.00 per token
$10 million fundraising → 10 million tokens issued
Asset-Backed Model
1 token = 1 unit of asset
50,000 sqft → 50,000 tokens (e.g., 1 token = 1 sqft or 1g gold)
Select a pricing model that strikes a balance between clarity for investors and technical feasibility for the token standard and applicable jurisdiction.
Fundraising Target Determination
The total number of tokens should reflect your funding needs and capital structure strategy. Consider:
Total Asset Cost / Value
The baseline for maximum capital raised
Ownership Percentage Sold
Determines how much of the asset is fractionalized via tokens
Operational Capital Needed
If issuing to raise working capital, include development or business runway
Issuer Retained Ownership
Balance between dilution and capital injection
For example, a $20M real estate project tokenizing 60% equity at $1 per token = 12 million tokens issued = $12M fundraising target.
Issuance Mechanics: Pre-Mint vs. Dynamic Minting
Pre-Minted Supply
Full token supply is minted at once and distributed based on purchases
Mint-on-Investment
Tokens are created dynamically as investors commit capital (e.g., Reg A+, Reg D)
Pre-minting is suitable for fixed-asset fractionalization (e.g., real estate), while dynamic minting works well for rolling raises or revenue-based models.
Best Practices Summary
Keep token pricing intuitive ($0.10 or $1.00) for investor accessibility
Align token supply with your asset value and fundraising goal
Choose a supply model based on transparency, investor comprehension, and automation
Use clear economic logic: total tokens x price = capital raised
Document your supply and pricing logic in the whitepaper, metadata, and investor disclosures
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