Tokenomics deflation refers to a design characteristic within a cryptocurrency’s economic model that systematically reduces the total supply of tokens over time. This reduction is typically achieved through mechanisms like transaction fee burning, buybacks, or other supply-reducing events. The aim is to increase the scarcity and potentially the value of the remaining tokens.
Context
Projects implementing tokenomics deflation often seek to create upward price pressure by limiting supply while demand remains constant or increases. Ethereum’s EIP-1559, which burns a portion of transaction fees, serves as a prominent example of deflationary tokenomics. The effectiveness and long-term sustainability of deflationary models are continuous topics of discussion in the digital asset space.
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