How Does “Protocol Sink” Utility Contribute to Token Demand?
Protocol sink utility refers to mechanisms that require users to acquire and lock or spend the native token to access core network functions or services. Examples include paying transaction fees, collateralizing a loan, or staking for governance.
By creating necessary and persistent demand for the token, the protocol effectively "sinks" the supply, which contributes positively to its long-term intrinsic value.
Glossar
Persistent Demand
Resilience ⎊ Persistent demand within cryptocurrency derivatives signifies sustained buying pressure despite price volatility, often indicative of underlying fundamental conviction or strategic accumulation.
Collateral Token Function
Mechanism ⎊ Collateral Token Function within cryptocurrency derivatives represents a programmatic approach to managing risk exposures, specifically utilizing a tokenized representation of underlying collateral assets.
Sink Utility
Absorption ⎊ Sink Utility, within cryptocurrency derivatives, represents a mechanism for managing implied volatility risk by strategically absorbing selling pressure in options markets, particularly during periods of heightened uncertainty or concentrated expiry cycles.