Recently, there’s a new wave of Defi tokens coming across and they’re including a mechanic called Reflection Token. As it seems a simple concept, in this article we are talking about reflection tokens and how do these tokens work?
In DeFi an RFI or ‘Reflection token’ collects a fixed transaction fee and utilizes a smart contract to automatically indicate a portion of those fees back to existing token holders enabling them to earn yield.
Meanwhile, RFI in itself does technically yet apply to one of the original DeFi reflection tokens considered as Reflection Finance (RFI).
The arrival of Reflection Tokenomics
An outburst in the growth of the network on the Binance Smart Chain, which is actually an Ethereum Virtual Machine congenial blockchain, has created a massive number of decentralized finance projects utilizing ‘reflection’ token mechanics.
For examples of this, you can see projects which include SAFEMOON where a 10 percent fee is levied for whole token transactions, along with half of these fees collected independently being redirected to present token holders.
The half of other fees that can be assembled is utilized to build liquidity and a minor portion burned and forever from circulation.
Later, safe SAFEMOON gained fast popularity on the BSC a number of other projects instantly followed suit with the same mechanics. Here are some examples such as GLASS and GMR Finance.
‘Reflection’ Tokens solve which kind of problems?
There are often astronomical tokens that provide (think quadrillion, with a q) and recoil token mechanics, this model sets to escape whales from quick manipulating and exploiting DeFi projects with few token supplies.
It strives to do this in part by discouraging sooner participants from dropping early during the tokens starting price discovery phase.
Currently, reflection tokenomics is a comparatively new event in the crypto world of DeFi so goes along with caution. Meanwhile, the tokenomics maybe indicate they’re in my opinion however, they are in my opinion still relatively unproven and the project they’re merged with, well there are many but only consist of products, proceed with caution friends.
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