Deflationary Mechanisms: Generating Value Behind the Coin
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The world of blockchain technology has pushed financial systems into an era where people are becoming more interested in the investment opportunities and utilities of digital currencies. To further boost the adoption, new projects launch their native tokens with interesting mechanisms to benefit the investors.
Currently, there are almost 12,000 tokens in the market, and most of these tokens follow unique protocols and mechanisms to add value to the project and its users. One of the concepts that have amassed popularity is a deflationary mechanism for tokens. While it is easy to confuse deflation in traditional finance with deflation in crypto, in theory, they are entirely different.
While in centralized finance, deflation reflects a negative growth, in the crypto space, it suggests a positive approach where the investors are rewarded the most. Several tokens and projects have incorporated deflationary mechanisms in their operations. Let’s understand how a deflationary token operates.
What is a Deflationary Token?
A deflationary asset in the crypto space is an asset that will have its market supply of tokens decrease gradually with time. The project can perform several activities such as burning, buy-back, etc., to reduce the circulating supply. By reducing the circulating supply, the project is intentionally increasing the token’s value following the supply-demand rule.
Moreover, any token with a fixed supply in the crypto space is inherently deflationary. As investors purchase and hold the tokens, the circulating supply will automatically decrease. Burning is a popular strategy used by projects to reduce the token supply. An interesting thing to note here is that the project does not destroy the tokens as they exist virtually, but they send the token to a dead wallet, which is a wallet address that no one has access to, rendering them unusable.
Over time several projects have taken an interest in deploying a deflationary mechanism as it helps to ensure constant price growth of the token. Moreover, investors are also more interested in deflationary tokens as this mechanism ensures that their investments will increase with time.
One of the easiest examples to understand deflation is Bitcoin. As Bitcoin has a fixed supply, its price constantly increases as more investors start holding their coin. Other popular projects such as Ethereum and Binance also deploys deflationary mechanisms to their advantage.
Goku, an anime based token, also took a unique approach in deploying a deflationary mechanism for its token.
Understanding Tokenomics
Goku is an anime-crypto project designed to build a safe and secure community for all anime and manga lovers. The project is powered by their native ERC-20 token that has an in-built deflationary mechanism. The project developers have taken a unique tokenomics approach for the project with a low circulating supply to make the token rare.
Goku had burnt a large chunk of its circulating supply to start the chain of deflation. To add to the utility and simultaneously burn tokens, Goku’s tokenomics are designed in such a way that a percentage of the tax charged on each transaction of their token is sent to their dead wallet. Moreover, the tax is also used to add liquidity to keep the token on an upward growth chart. The project is developed for a long-term run, has formed a unique way to create deflation within their token as the token holders increase and this in-turn has incentivised over 4200 investors to join the community of holders of Goku.
Incentive for Investors
Deflationary tokens act as a fantastic investment opportunity where the investors can constantly benefit from the decreasing supply of the token. These tokens offer the investors ability to get excellent ROIs without having to consciously manage and address their investments on a long term basis.
More and more projects are incorporating deflationary mechanisms and developing the crypto space to be a lucrative and safe environment for all investors. With projects like Goku also incorporating such mechanisms into their tokenomics, it is evident that investors are actively seeking out deflationary tokens as investment opportunities.
