“The more you hold it, the more valuable it becomes.” This is the fundamental principle behind deflationary token economies. In traditional economies, inflation is a common occurrence, where the value of goods and services decrease over time due to an increase in supply. However, in a deflationary token economy, the opposite occurs. The supply of the token decreases over time, leading to an increase in demand and value.
CHANGE is now 100% deflationary, so let’s dive deep and see what this means, why it matters, and what you can expect from the future.
In this article, we’ll explore what deflationary token economies are, how they work, and what benefits they can bring to investors and users alike. And here we go.
Inflationary vs Deflationary Tokens – what’s the difference?
Inflationary cryptocurrencies are assets that have an unlimited or increasing supply. This means that new coins are continuously added to the circulating supply, and the total supply of the cryptocurrency will continue to increase over time.
While this doesn’t sound like a very good deal, inflationary tokens can have some advantages. For example, they can promote a more stable ecosystem by ensuring that there is always enough supply to meet the demand, even if it increases infinitely. Additionally, because the total supply of the token is not limited, inflationary tokens can be used as a medium of exchange, since their value is unlikely to rise significantly over time.
Benefits aside, there are also several negative sides to an inflationary economy. Because there is no cap on the total supply of the token, its value may decrease over time as more coins are added to the market due to inflation – more of it, less value to it. This logically leads to inflationary tokens not being as attractive to investors seeking long-term value appreciation.
A deflationary crypto economy is one in which the supply of a cryptocurrency decreases over time, typically through mechanisms such as token burning or other methods of reducing supply. Because the total supply of the token is limited, the asset can have greater long-term value appreciation potential. Additionally, deflationary tokens can promote a more stable ecosystem by discouraging short-term speculation.
It really depends on the context and proposed use cases, but a deflationary token economy can be preferred from several standpoints. Here’s a few of them.
A deflationary cryptocurrency becomes scarcer over time as the supply decreases, which can potentially increase demand and drive up the value of the remaining tokens. This creates a self-reinforcing cycle where increasing token value further incentivizes holding and reduces token velocity, which can lead to even more scarcity and value growth.
Reduced Inflationary Pressures
In a deflationary crypto economy, the supply of the currency decreases as it’s being bought up (and in CHANGE’s case – when used), which can help counteract inflationary pressures that might arise from other factors.
Incentivize Long-Term Holding
Deflationary mechanisms can create strong incentives for long-term holders to hold onto their tokens, as the potential for future scarcity and value growth can make it more attractive to hold than to sell. This can lead to a more stable market and less volatility, as well as potentially attracting long-term investors who are interested in the project’s long-term success.
Build a stronger community
Deflationary mechanisms can help align the interests of the community and the project, and we’ve already seen this to be more than true, as the vote to continue burning the CHANGE token showed.
When the value of the deflationary token is tied to the success of the project, there is a shared interest among token holders and the project team to work together to increase the value of the tokens.
These are some of the key characteristics of a deflationary economy. Now let’s see how they apply to CHANGE and the future.
Burning CHANGE tokens
Permanently removing tokens from circulation, also colloquially known as “burning”, is at the heart of a deflationary economy.
As the Changex community voted on it, we will continue with the plan to burn the leftover tokens from the ICO at a rate of 1.4 million per month until September 2024. This will reduce the already fixed CHANGE supply by a grand total of 35,382,326.00 tokens, effectively increasing the value of the remaining tokens and pushing against inflation. Doing this gradually over time is the more sustainable approach, which is why we chose it.
Staking rewards and APR boosts
If you’re a Changex veteran staker, you probably know that the token has provided consistently high passive income in the form of staking ever since its inception. The APY currently (or just until now) sits at 34%, but once we transition to a deflationary economy, the staking rewards will fall accordingly.
We expect the staking returns to kick off at the ~5% mark, which is a fantastic starting point for a deflationary token. If this APR is consistent, then in the next 365 days CHANGE staking should pay around 5 million tokens to all stakers. However, we will be providing boosts to the CHANGE APY by integrating more staking pools in Changex (the first is right around the corner) and forfeiting our commissions.
So, instead of collecting them, we will keep everything decentralized, and use the commissions to buy CHANGE and automatically airdrop it to stakers, which will basically increase CHANGE’s APR with every next pool added. There is infinite room for more pools, so this is not time-limited or a one-time thing, but something that will happen on a regular basis.
When the APY drops after the transition, we will be taking a smart approach to “feeding” the CHANGE staking pool, using solely the commissions collected from the HYDRA staking pool and all subsequent staking pools that are yet to be added to Changex, as we pointed in the previous paragraph. This is more important than it seems at first glance.
Not only will there never be new CHANGE, but the existing CHANGE will be bought using the commissions and then distributed to existing stakers, which will exert constant buying pressure on the token and will support its price. Coupled with the monthly burn, we believe that this is a solid foundation for a sustainable deflationary economy.
As always, we thank you for your continued support and trust in us and we hope you’ve found this article insightful. Stay with us for more updates, as we have a grand announcement in the making!
Thank you for reading,
The Changex team