How Does a ‘Buyback and Burn’ Mechanism Affect the Circulating Supply and Token Price?
A buyback involves the protocol using its revenue or treasury funds to purchase its native token from the open market. The 'burn' then permanently removes these tokens from the circulating supply.
This reduction in supply, assuming constant or increasing demand, exerts upward pressure on the token's price. It also signals commitment to value accrual and reduces potential future treasury selling pressure.
Glossar
Deflationary Token Model
Mechanism ⎊ A deflationary token model, within cryptocurrency and derivatives, introduces a diminishing supply schedule, typically through burn mechanisms or transaction fees redistributed to reduce circulating tokens.
Circulating Supply
Token ⎊ The circulating supply within cryptocurrency contexts represents the number of tokens currently available and actively traded on exchanges or held by investors, excluding those locked in smart contracts, staking agreements, or otherwise inaccessible.