update 19 August 2021

The Boom in Deflationary Token – What You Need to Know

The crypto space is rapidly expanding and in-comes different token models with different features leveraging varied mechanisms. Tokens in the crypto space are broadly categorized into either inflationary token or deflationary tokens. An inflationary token employs a unique model where tokens are added to the market after a specified period of time. 

A well-demonstrated example of an inflationary token is Bitcoin, which is released at a rate of 12.5 new coins every 10 minutes as a reward to the miners for mining the next block. Not all inflationary tokens are issued via mining. For instance, Ripple (XRP) is issued by the company, which gradually sells them off to fund operations. 

Deflationary tokens take a novel approach where tokens are eliminated from the market “Burned” after a given period of time. Several mechanisms are removed from the market, such as buying-back and token burns from the issuer. The major benefit of deflationary tokens is that the coins grow in value as they get burned and staked in a pool to raise their own capital and ensure liquidity. 

Some concerns eliminating excess tokens make deflationary tokens less available and consequently decrease the token’s actual supply. However, this is not the case with deflationary token since they can actually be divided by 100 millionths. Thus can never be short of supply. 

Nonetheless, deflationary tokens have since come under fire from regulators such as U.S Securities and Exchange Commission (SEC) as they are often viewed as security. The main issue is that the deflationary mechanism used to purchase tokens from the market is generally dependent on a company’s success. If a company is quite successful, it will be able to buy more tokens from the market, reducing the supply and making the token much successful. 

On the other hand, if the company performs poorly, it will fail to buy the token’s excess supply leading to a non-functional ecosystem. In essence, deflationary tokens are often viewed as security due to the heavy link between its success and the ecosystem’s circulation. There are over 20 deflationary tokens in the crypto space with burn rate ranging from as low as 0.1% to as high as 90%. This guide will look at the top four deflationary tokens looking at their mechanism and technology behind them.

Burn Token

The Burn Token is a notable deflationary token in the crypto space offering deflationary capabilities at a rate of 1% of the transacted amount. The token is backed by Ethereum stored in reserves and offers full liquidity following the exchange contract. Therefore, BURN holders can sell their tokens in exchange for ETH or any other token they want. 

1% of every BURN transaction( trade or transfer) is transferred to the Ethereum Genesis Wallet. The transfer eliminates the amount transacted from the total supply of BURN. This means that BURN’s supply falls with every transaction, resulting in a continuous rise in BURN’s price. BURN doesn’t have an airdrop. Instead, each BURN is traded for Ethereum, and the community is responsible for driving the price.

Regarding its technology, BURN employs Uniswap– an Ethereum-based protocol that is designed to facilitate automatic digital asset exchange between ETH and ERC20 tokens. The exchange contract holds a reserve of ETH and BURN tokens. The exchange contract also allows for direct ERC20 to BURN trades using ETH as an intermediary. Uniswap also functions to mint liquidity token to track how much each liquidity provider has contributed to the total reserves. BURN Token was introduced in the market on 24/06/2019 and traded at $0.0011494. 0.3% of all trade volume is distributed proportionally to all liquidity providers in the liquidity pool.  

The BOMB Token

The BOMB Token is also an Ethereum-based deflationary token. Like BURN token, 1% of the tokens used in the transaction are destroyed. There are currently just 1 million BOMB tokens in existence, and the number is decreasing at a fast rate. There are only 1 million BOMB tokens left in existence, and it’s projected that by 2034 no BOMB tokens will have been left in existence. 

BOMB Token prides itself as a “self-destructive currency” and a “social experiment” created to establish deflationary currency feasibility. BOMB has been rated as the best most successful airdrop in the crypto space running a website such as Coinmarketcap, Mercatox, and DDEX with a $ 1 million trading volume a day. BOMB seeks to be the leading deflationary token in the crypto space in the future.  


The SMASH token is a deflationary token with an algorithm built to accomplish a 2% irreversible token burn in all transactions carried out. This burn achieves a decrease in token supply with time, in turn, enhancing scarcity and enhancing the token’s value to the advantage of developers and investors. SMASH is also a unique token as it provides support and charity for the poor and needy. SMASH Token also powers a social platform that allows unlimited interaction between caregivers and supporters to help end insolvency in the world.

SMASH token is based on Ethereum Blockchain with an initial supply of 1 000, 000. SMASH Tokens gives users exclusive access to premium app subscription service. SMASH token also acts as a gateway to various digital assets, allowing investors to adjust their portfolio according to their needs.

Bottom Line

Deflationary tokens have become quite prominent in the crypto space. It’s based on the premise of reducing the supply on each transaction to increase scarcity and consequently enhance the price of the token in circulation. Deflationary tokens have largely been compared to stable coins but better capabilities to combat volatility and inflation in the crypto space.

There is no doubt that deflationary tokens provide a new frontier in the crypto sector attributed to the burning practice, which stabilizes tokens or crypto market value, in turn, building a sense of confidence in investors to hold on to their tokens for long. In the future, we are expected to see more deflationary tokens launched in the crypto space accompanied by increased blockchain adoption.  

price change

Featured image courtesy of Shutterstock.

More posts

How Many ETH Will Burn After the London Fork?

Since its launch in July 2015, Ethereum has grown exponentially to be the second leading cryptocurrency in market value after Bitcoin. The platform’s growth has primarily been attributed to its smart contract feature, which powers the deployment of a wide range of applications, including oracles, decentralized finance (DeFi), decentralized exchanges (DApps), marketplaces, crypto-collectibles (NFTs), and developer tools.  Despite its growth, Ethereum faces numerous challenges that hinder its usability. The scalability challenge is one of the biggest ones that Ethereum faces. The current state…

The Impact of Adoption of Cryptocurrencies on E-commerce Business

E-commerce is the short form of electronic commerce. It is the buying and selling of merchandise over the internet networks. It also involves the transfer of funds and the keeping of records to certify the transactions made. E-commerce is of three types; business-to-consumer (B2C), business-to-business (B2B), and business-to-government (B2G). The main reason for using cryptocurrencies in e-commerce is to get rid of third parties that control the transactions. This relationship can make online shopping much easier and safer since blockchain technology that backs up cryptocurrencies is…

What it Means to Make Bitcoin a Legal Tender

June 9, 2021, marks the first move that would make history in Bitcoin's timeline. El Salvador passed a bill where 62 of 84 congressional voters would make Bitcoin a legal tender. Fast forward to September 7, and El Salvador became the first country to make Bitcoin a legal tender. In this article, we shall look into what it means for Bitcoin to be a legal tender in detail; What is Legal Tender? "This note is legal tender for all debts, public and…

The Correlation Between Blockchain Activity and Transaction Fees

Miners and validators are essential cogs in any crypto project. They're the ones who process transactions on a blockchain (BC) activity. For their efforts, crypto projects compensate them for their efforts from transaction fees. A transaction is only valid when it has undergone validation. The process ends in the validators adding it to the BC. Mining consumes a lot of computing power. As such, it's an energy-intensive exercise. The motivation for the miners is the block reward that consists of…

Understanding Shrimpy’s New DEX Trading Feature

DEX trading is one of crypto's newest but also most complex investment options as of late. Decentralized exchanges are trustless peer-to-peer (P2P) trading environments relying on smart contracts that help facilitate crypto exchanges. The clear benefits of DEX trading are security, anonymity, and greater user control. Although decentralized exchanges, and DeFi as a whole, have gained immense popularity over the past two years, the segment is still considered new by many in the community. A large chunk of crypto investors still does not feel…

Why Do Exchanges Freeze User’s Crypto Funds?

cryPicture this: you've finally mustered the courage to take the plunge into crypto. Everything is going right for you. You're mastering the hacks to optimize your investment and are looking forward to a fulfilling experience within the space. Then it happens. You log in to your account and find that you can't access it anymore, let alone transact in it. In a panic, you try customer support to no avail. Next, you can't help asking how you got here. Is it…

Determining the Initial Value of Cryptocurrencies

It is quite obvious that the total market cap of cryptocurrencies has enjoyed impressive growth since their inception. It was able to hit the magic $2trn figure, standing at $2.064trn as at the time of writing. That is close to 2.5 times the value of crypto at the start of this year, 2021, as per coinmarketcap data. While all these huge figures are truly impressive, things haven't been like that. The increased market capitalization has been more of a result…

Factors Driving the Price of a Crypto Project to Skyrocket

Cryptocurrencies continue to showcase outstanding crypto performance since the launch of Bitcoin in 2009. Global investors are looking forward to establishing financial stability with digital assets. Due to the growing interest, crypto prices are making a drastic shift to the top.  Still, in some scenarios, the market trend keeps decreasing for specific periods. A coin's bearish momentum creates fear and panic for users who believe in the future of the asset.  The opposite is a bullish market that records skyrocketing prices of…

Vivid Indicators of a Bull Run in the Crypto Market (Bull Market)

In the cryptocurrency space, a bull market is one whereby the prices are expected to rise significantly or are rising. Due to the volatile nature of crypto, the term “bull market” is reserved for more extended periods characterized by the rise of a large portion of the prices. To be categorized as a rise, the price must be up 20% after two declines of 20% each. There is optimism, expectations of solid results, and investor confidence in a bull market,…

Historical Hardfork Events Every Crypto Enthusiasts Should Know About

Blockchains have been gaining attention since the history of crypto. The highly advanced systems help decentralize and streamline financial systems globally. As the blockchain systems grow, investors start noticing issues and propose an upgrade. However, for any upgrade to occur, blockchain requires the consensus of all participants. If there is no consensus, two factions with opposite ideas may form. The developers may choose to go ahead with the upgrade but maintain the status quo in the original chain. At that point,…