What Factors Typically Cause a Decrease in a Token's Velocity? ⎊ Path

What Factors Typically Cause a Decrease in a Token’s Velocity?

A decrease in velocity often results from increased utility for holding the token, such as staking for governance rights or receiving protocol fees. Illiquid holding by long-term investors or the use of the token as a collateral asset in DeFi also reduces the frequency of transactions.

Token lock-up mechanisms, like vesting schedules or mandatory bonding, directly remove tokens from the active circulating supply, leading to lower velocity. Any mechanism that incentivizes holding over transacting will decrease velocity.

How Does the ‘Velocity’ of a Token Relate to Its Utility versus Its Speculative Nature?

What Mechanisms Can a Protocol Implement to Intentionally Reduce a Token’s Velocity?

How Does the Duration of a Lock-up Period in Staking Affect Its Perceived Value?

What Are the Typical Reasons for Implementing a Token Lock-up Period?

What Factors Primarily Influence a Token’s Velocity in a Decentralized Application?

How Does the “Token Lock-up” Period Affect the Viability of a PoS Attack?

How Can a Protocol Design Reduce Its Token Velocity?

How Does the Lock-up Period for Staking Affect the Token’s Market Liquidity?

Glossar

Vesting Schedules

Schedule ⎊ Vesting Schedules dictate the timeline over which allocated tokens, typically those reserved for founders, team members, or early investors, are gradually unlocked and become transferable on the blockchain network.