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A Beginner's Guide to Aptos Token (APT coin) Tokenomics And Use Cases

A Beginner's Guide to Aptos Token (APT coin) Tokenomics And Use Cases

Explainers

11 Nov 2022

Remember Meta's blockchain project, Diem? It was formerly known as Libra. If you still need to catch up on the latest news about it, then you should know that it has officially been defunct since January 2022.

While regulators and a large part of the crypto community have celebrated Diem's failure, Meta's experimental project has a new successor.

Created by former Meta developers, Aptos is a new Layer 1 blockchain that leverages the custom Move programming language and parallel transaction execution to achieve excellent levels of scalability.

Like Diem, the new Layer 1 project of former Meta developers has been no stranger to controversy. Despite accumulating massive amounts of venture capital (VC) funding at a $2 billion valuation, Aptos' tokenomics has sparked quite some criticism from crypto market participants that was followed by what critics called a subpar launch.

In this article, we explore the essentials of Aptos, its tokenomics, and potential use cases. Let's get started!

What Is Aptos Crypto?

Aptos' history dates back to 2019 when Meta tried its luck with blockchain technology.

Diem's future seemed promising at the time, especially considering that it had prominent partners like PayPal, Stripe, eBay, and Visa. The tech giant's ambitions triggered massive regulatory scrutiny. By late January 2022, major brands left Diem, which eventually decided to close its projects and sell all its assets and IP for $200 million.

A few weeks later, in February, Aptos was born. Founded by former creators of Diem's Novi wallet, Mo Shaik and Avery Ching, the project features a team of developers that previously worked at Meta.

In a nutshell, Aptos is a Layer 1 blockchain that seeks to compete with Ethereum and high-throughput contenders like Solana, Binance Smart Chain, and Avalanche. Like the latter chains, Aptos puts a key emphasis on scalability. According to the project, its blockchain could process over 10,000 transactions per second (TPS) in June, with the possibility of increasing the network's capacity to 100,000 TPS in the future.

Aptos achieves high throughput through two innovative components. The first one is Move, a custom programming language created in-house by Meta developers, which was initially planned to be used to build Diem.

As Diem is now defunct, ex-Meta developers have used Move to build Aptos. Simply put, a new proprietary programming language could pose initial barriers for developers seeking to join the ecosystem. Move is designed to provide enhanced security and scalability for blockchain networks.

At the same time, Aptos leverages a concept called parallel execution for transaction ordering. As part of the mechanism, multiple chains run in parallel, processing transactions simultaneously.

On the other hand, most blockchains leverage sequential or serial execution, where transactions are added to the distributed ledger one at a time. This means that full nodes must wait for each new transfer to be verified before processing another.

As you can see, the latter process is highly inefficient in terms of scalability. On the other hand, while the former mechanism is new and may not be as stable as sequential execution, parallel transaction processing allows Aptos to scale to hundreds of thousands of transactions.

However, just like with other high-throughput Layer 1 blockchains, Aptos has sacrificed a degree of decentralization to achieve increased scalability due to the limited number of validators.

Since the first blog announcing Aptos in February, the project has been at the center of discussion in the crypto community. Most importantly, the team collected massive funding from top VCs and early investors through multiple rounds totaling $350 million at a valuation of $2 billion.

After a month of testing, Aptos rolled out its mainnet blockchain, which has been up and running since mid-October 2022. While some considered the launch underwhelming, developers have been actively building multiple dApps, ranging from NFTs and DeFi to infrastructure solutions to expand the ecosystem.

Aptos Coin Tokenomics

Aptos took a rather controversial approach to its tokenomics.

While a token's utility, supply and price stability mechanisms, distribution, and governance are crucial factors that could determine a project's success, ex-Meta developers decided not to share these details with the community until right before the exchange listing of the native Aptos (APT) coin.

And the controversy around Aptos' tokenomics remained even after the project published a blog post in October about APT's distribution and incentive plans. According to the information shared by the team, APT Coin has no maximum supply, featuring an initial total supply of approximately 1 billion coins, from which 130 million are currently in circulation.

Most importantly, APT's distribution goes as follows:

  • 51.02% of the tokens are allocated to community growth and incentives

  • 19% to core contributors

  • 16.50% to the Aptos Foundation

  • 13.48% to early investors

Based on Aptos' tokenomics and distribution model, nearly half of the 1 billion APT goes to early investors, the Aptos Foundation, and core contributors. Due to the high allocation of insiders, the project has been heavily criticized by crypto users. For comparison, this group only received 15% of ETH, 17% of ADA, and 33% of DOT tokens.

What made the situation worse is that, in addition to insiders' 49%, a significant part of the community pool accounting for 10% of the initial total APT supply, will be held by Aptos Labs, a centralized company.

While all of the APT distributed to insiders are vested for a minimum of 12 months, the team behind the project stated that over 82% of the tokens in the network were staked at the time of the announcement. Since staking rewards are not subject to vesting, critics have argued that this gives an unfair advantage to core contributors and investors who can freely sell their coins for a profit on the market.

Aptos (APT Crypto) Use Cases

As we have already explored the essentials of Aptos' Coin tokenomics, let's see the potential use cases of APT Crypto within the high-throughput Layer 1 blockchain network.

  • Cover transaction and network fees

  • Deploy and run smart contracts

  • Participate in community governance

  • Stake APT and secure the network as a validator via the Proof-of-Stake (PoS) consensus mechanism

Trade APT Token With AAX

Aptos' tokenomics and developers' past with Diem and Meta have sparked some controversy around the Layer 1 project.

Despite the criticism, Aptos Token is a promising project that leverages innovative components like the Move programming language and parallel transaction execution to achieve scalability beyond hundreds of thousands of TPS.

Moreover, the project has raised $350 million from prominent investors, which is more than enough capital for the team to execute its long-term plans.

Looking to gain exposure to Aptos? Head to AAX and start trading APT on our LSEG-powered, institutional-grade cryptocurrency exchange!

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