What are hyper-deflationary tokens and how to trade them effectively?
Deflationary tokens have been showing extraordinary demand lately. The reason is obvious: the more tokens are burned over time, the more profitable it is for holders to hold them, as their share of the total issue increases over time. How this works and why we’ll tell you below.
To reiterate, Deflation Tokens are tokens that have a method built into their smart contract to burn with each transaction. Every time tokens are transferred on the blockchain, a percentage of them are automatically burned and distributed to holders. Thus, those who hold the tokens increase their percentage relative to the total token issue with each transaction, which decreases accordingly. The more transactions, the faster the emission decreases, and the faster the percentage of holders who don’t transfer tokens increases. Burning occurs both when transferring funds in blockchain and when buying/selling on decentralized exchanges.
The burning or destruction of a coin is not to be taken literally. What happens instead? Coin tokens are taken out of circulation. They are placed in a public wallet from which the tokens can never be retrieved.
Theoretical hyperdeflation is more or less like deflation, and there is no concrete measure of the difference between it and deflation.
The cryptocurrency world has seen the rise of new trends and new models in the token economy. As demand increases, more and more projects are introducing token hyper-deflation mechanisms to incentivize holders. For simplicity, hyper-deflationary tokens are designed to have a high degree of deflation. This is achieved by contracting the tokens by destroying a certain percentage of the tokens with each transfer.
Deflationary currencies: an ambitious experiment in the crypto industry
While major paper currencies are based on an inflationary model to stimulate spending, cryptocurrencies use deflationary mechanisms to maintain stable value growth to encourage users to hold coins and use them to hedge in the general market.
Coin flaring is a popular method of stimulating deflation, especially among native exchange token issuers. When developing such a token, it is a matter of finding the right balance between encouraging users to spend and retain. Rock’n’Block develops tokens with this balance in mind.
Upgrade the current token model with Rock’n’Block
When creating a new deflationary, Rock’n’Block blockchain experts calculate an accurate mathematical model that determines the value of an asset.
Rock’n’Block developers are trying to improve the tokenomics proposed by SafeMoon by using a deflationary issuance model. Each time a transaction occurs, 5% of it is burned and another 5% is redistributed to the remaining holders of the asset, depending on the number of tokens they own. The exchanges, however, must distribute this 5% to the users. In the case of custom development, the percentage of distribution and burn is set to any on request.
This tokenomics model should reduce token volatility and encourage token holders to keep the token and not just trade it. However, this standard model is often criticized.
The Rock’n’Block team is developing a modernized token that not only rewards holders with static rewards, but also automatically eliminates every transaction in the liquid mining pool. Rock’n’block is the first developer to introduce automatic custom buyback counting.
Rock’n’Block’s unique concept allows smart contracts to automatically trigger buyback and elimination after each sale. Thus, the approach is to increase the value of the token and encourage holders to continue to hold it as the repurchase continues to increase in price.
We are now developing a deflationary token on the Tron blockchain and solving the difficulty of adding liquidity to JustSwap. Read about it in the next digest of the Rock’n’Block company’s development.