How Can a Protocol Design Reduce Its Token Velocity?

A protocol can reduce token velocity by implementing strong utility mechanisms that incentivize long-term holding. This includes mandatory staking for network security (Proof-of-Stake), time-locking for boosted governance rights (ve-tokens), or requiring the token as collateral for a service.

By making the token a productive asset that generates yield or provides essential utility, the protocol reduces the rate at which users sell it, thereby supporting a higher valuation.