Token Economy
The broader economic ecosystem around AI tokens including pricing models, cost optimization strategies, and the financial dynamics of building AI-powered products.
Why It Matters
Token economics determine whether AI products are profitable. Understanding cost per query, revenue per user, and optimization levers is essential for AI product managers.
Example
An AI startup calculating that each customer query costs $0.03 in tokens, they need 1,000 queries/user/month to justify the $50 subscription, and caching reduces costs by 40%.
Think of it like...
Like the unit economics of any business — you need to understand the cost of each transaction and ensure revenue per customer exceeds costs at scale.
Related Terms
Tokenomics
The economic framework around token-based pricing for AI API services, including cost per token, input vs output pricing, and optimization strategies.
API
Application Programming Interface — a set of rules and protocols that allow different software applications to communicate with each other. In AI, APIs let developers integrate AI capabilities into their applications.
Inference
The process of using a trained model to make predictions on new, previously unseen data. Inference is what happens when an AI model is deployed and actively serving results to users.