Definition ∞ Deflationary tokenomics refers to a cryptocurrency’s economic model designed to decrease its total supply over time. This reduction in supply is typically achieved through mechanisms such as token burning, where a portion of transaction fees or other tokens are permanently removed from circulation. The aim is to increase the scarcity and, theoretically, the value of the remaining tokens, counteracting inflationary pressures. This economic design influences investor behavior and the long-term price trajectory of a digital asset.
Context ∞ Deflationary tokenomics is a common feature discussed in crypto news, particularly when analyzing the investment potential of new digital assets. Projects often implement these mechanisms to create upward price pressure and reward long-term holders. However, debates exist about the actual effectiveness and sustainability of such models, especially during periods of low demand or significant market volatility.
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