> For the complete documentation index, see [llms.txt](https://docs.pixels.online/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.pixels.online/token/tokenomics-101.md).

# Tokenomics 101

This is a high-level, extremely simplified look into how we're approaching our tokenomics.

#### Supply and Demand Curves

To start with the basics: currencies can be modeled on a graph with two curves: supply and demand. Granted there's a lot of nuance behind these curves in how they look, and how they shift. Where these curves meet is where the token's value is determined (in a closed system).

The supply of a currency is typically shifted by the largest holder of that currency or a governing entity by either introducing more currency into a system or removing/burning currency from a system. Reducing the supply of a currency can shift the supply curve to the left, increasing the supply of a currency can shift it right.

![](/files/lBf19qJAIXUeQgxlVAoS)

#### The Quantity Theory of Money

{% embed url="<https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/money-banking-and-investment/quantity-theory-money>" %}

> PV = MY

You can also model the price of a currency (in a closed system) via the Quantity Theory of Money.

* P = **Price Levels** - How items in an economy are priced relative to their value&#x20;
* V = **Money Velocity** - How often a currency is exchanging hands
* M = **Money Supply** - The amount of currency existing in a system
* Y = **Output** - The number of goods being produced by an economy

All of these variables have a play in how a currency is priced and its value.