What is Token Economics (AI)?
TL;DR
The token-based pricing structure of LLM services and optimization strategies. Essential knowledge for cost management.
Token Economics (AI): Definition & Explanation
Token Economics (in the AI context) refers to the pricing structure of LLM services based on token consumption and the strategies for optimizing those costs. Example pricing includes GPT-4o at $2.50 input / $10.00 output per million tokens, and Claude 3.5 Sonnet at $3.00 input / $15.00 output per million tokens. Cost optimization techniques include writing concise prompts, leveraging prompt caching, using batch APIs (typically 50% discount), choosing the right model for the task (cheaper models for simple tasks), and estimating token counts in advance. Understanding token economics is essential for maximizing ROI in enterprise AI adoption.