Definition ∞ A token sink refers to a mechanism or address designed to permanently remove a certain quantity of cryptocurrency tokens from circulation. This process, often called burning, reduces the total supply of a token, which can potentially increase its scarcity and value over time. Token sinks are typically implemented as part of a tokenomics strategy to manage supply and demand. They serve a deflationary purpose within a digital asset ecosystem.
Context ∞ In crypto news, discussions about token sinks are common, especially when projects announce burning events or integrate such mechanisms into their protocol design. Reports often analyze the impact of these sinks on token prices and market sentiment. The effectiveness of a token sink is a frequent subject of debate among investors and analysts assessing a digital asset’s long-term economic viability.
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