What Is the Concept of a “Deflationary Mechanism” in Crypto?
A deflationary mechanism is a feature in a cryptocurrency protocol designed to reduce the total circulating supply of the coin over time. The most common example is a "burning" mechanism, where a portion of transaction fees or protocol revenue is permanently removed from the supply, increasing the scarcity of the remaining tokens.
Glossar
Eip-1559
Upgrade ⎊ EIP-1559, or Ethereum Improvement Proposal 1559, represents a significant upgrade to the Ethereum network's transaction fee mechanism.
Deflationary Mechanism
Impact ⎊ A deflationary mechanism within cryptocurrency, options, and derivatives contexts fundamentally alters asset supply dynamics, often through token burns, buybacks, or protocol-embedded scarcity features.
Deflationary Token
Mechanism ⎊ A Deflationary Token is a digital asset designed with an intrinsic mechanism to perpetually reduce its total circulating supply over time.
Deflationary
Concept ⎊ A Deflationary asset exhibits a supply schedule where the total circulating quantity is designed to decrease over time, often through mechanisms like token burning or fixed caps.
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.