What Is a ‘Deflationary’ Cryptocurrency Model?
A deflationary model is one where the total supply of the cryptocurrency decreases over time or where the rate of new coin creation is less than the rate of coin destruction (burning). This is often achieved through mechanisms like transaction fee burning or scheduled token destruction events.
The goal is to increase scarcity and potentially value.
Glossar
Scheduled Token Destruction
Destruction ⎊ This process involves sending tokens to an unspendable address, permanently removing them from the circulating supply, thereby creating deflationary pressure.
Transaction Fee Burning
Destruction ⎊ Transaction Fee Burning is a monetary policy mechanism where a portion or all of the fees collected from network transactions are permanently removed from the circulating supply, typically by sending them to an unrecoverable address.
Deflationary Model
Model ⎊ The deflationary model, within cryptocurrency, options, and derivatives, describes a system where the circulating supply of an asset diminishes over time, typically through mechanisms like burning or buybacks.