The cryptocurrency market is exponentially growing by the minute due to the several opportunities that have been opened by the provision of virtual transactions – making financial processes more convenient than they currently are with the involvement of banks and other monitoring bodies.
The edge of cryptocurrency when it comes to the efficiency of each exchange is being maximized in each new feature that various developers put forward, leading many analysts to believe that the growth of the crypto community will continue for years as the transition between conventional means to virtual measures persist.
While this is not necessarily all good, considering that the crypto market still has some level of instability due to the utterly virtual mechanism being employed in these programs, it still does provide innovative measures to go about financial transactions and investment plans – making it beneficial for users from a macro perspective.
The crypto community has branched out to several categories throughout the years, providing varying functionalities depending on the system being utilized by the program at hand. From these systems, several innovative measures are then developed to create some of the most popular projects that many crypto investors now use – each one maximizing the features comprised within their classification to put forward the functionalities that many investors use and love nowadays.
Reflection Tokens: An Initial Overview
Reflection tokens are essentially reward-based currencies that award token holders with a particular portion of the tax imposed on each transaction – creating a passive income-generating system that can be maximized by utilizing the token or wallet for your virtual operations. The transaction tax is often divided into equitable proportions that will go towards building the funds necessary to operate the program and the rebate mechanism of each transaction.
- Passive income generation that requires no heavy monitoring
- Earn staking benefits without staking tokens
- Stable market value
- Value appreciation is foreseen in the tokens’ future
- No central party involved, resulting in seamless and accessible transactions
- Encourages investors to hold tokens = delayed turnaround of investment
- Relatively new in the market
Weighing the Features
Overall, reflection tokens are still being gauged by several investors about whether their long-term viability is as significant as many initially thought it was. If current trends are anything to go by, though, it can be said that the value is certainly there, particularly when it comes to its income generation features and mechanisms. The drawn-out turnaround of investment would undoubtedly hurt the engagements for this token, but its current progress shows that reflection tokens are anything but a gimmick or a short-lived spark, for that matter.
Understanding Decentralized Finance Systems: The Home of Reflection Tokens
To better understand how reflection tokens work and are distributed within the market, it might be more efficient to first look at the platform where reflection tokens are disseminated.
One of the most popular systems in the crypto community – or perhaps even the most popular one – is the decentralized financial system, more commonly known as DeFi systems.
In the simplest sense, decentralized finance systems are a mechanism in which the necessity of a middle man or a monitoring body for each financial transaction is removed – making each interaction much more streamlined and accessible for users.
For the most part, decentralized finance systems often boast some key features, which may include:
- Eliminates the need for a financial company that will oversee each transaction, making interactions more accessible due to the removal of several requirements that are otherwise necessary for centralized finance systems.
- Ability to hold your money and finances in a digital wallet that an independent group or developer may have developed.
- A completely online process that can be accessed anywhere at the convenience of your own home.
- Fund transfer can be performed near-instantly – taking only a few minutes to an hour max to move finances from one account to another.
While this might seem like a highly open system that would benefit everyone who would be utilizing applications or programs built around this mechanism, the primary benefit of DeFi applications or dApps, i.e., removal of a monitoring body or middle man for each transaction, becomes an issue when it comes to the security of the wallet itself.
When it comes to unmonitored transactions, attacks directed to token holders will not be pinged by the system itself without any specialized features offered by the application being utilized itself – one which is dependent on the developers in this case.
One example of a virtual attack is a “dusting attack” wherein a small number of tokens or cryptocurrencies are sent out to several wallet addresses. When the user removes this unsanctioned transfer from their wallet, the sender will then be able to analyze the address that responded to their transfer – indicating that the wallet is active and would probably contain tokens. The wallet address will then be associated with the owner’s mined data, ultimately allowing opportunists to access the account and obtain the amount stored within the wallet for their use.
Of course, such attacks are now being managed by some developers through the implementation of either a stricter verification system for wallet and token holders or a notification system for transfers and transactions. However, there is still a long way to go for many to prevent dusting attacks or other more subtle invasions.
Defining and Understanding Reflection Tokens
Situated within the DeFi system, reflection tokens are a category of crypto tokens that are essentially reward-based currencies, awarding their holders with several benefits and rewards by simply holding the token or performing their transactions within qualified applications and wallets.
Reflection tokens would commonly charge a certain amount for each transaction called a “transaction tax,” This is the amount that the developers will circulate or utilize to simultaneously run the system and reward the user equally with the allocated amount for distribution.
With the incentives being provided for investors for simply utilizing the application for their financial transactions, the system promotes long-term holders, which will boost the influx of more new users to participate in the project. In addition to that, due to the tax being imposed on each transaction, albeit with a rebate that will be redistributed, later on, the market would usually be stable despite the fluctuations that might happen otherwise due to excessive token holding and poor currency circulation.
The Tokenomics Behind Conventional Reflection Tokens
To initially establish the context that will help you better understand the next section, it might be efficient to describe what tokenomics is and its role in the overall functionality of a particular token.
Tokenomics is a terminology that serves as a shortened form of “token economics,” – referring to how a specific cryptocurrency’s issuance, demand, and supply are cycled throughout the token’s distribution in the market.
Essentially, a currency’s tokenomics will show how the tokens are circulated among the user base and how the developers provide additional purchasable tokens to interested investors, whether during the initial launch or amidst the actual circulation of the token itself.
For most cryptocurrencies, the tokens have a pre-set algorithm that regulates the distribution of the tokens – with some even including a procedure wherein specific units of assets are either reacquired or removed from the circulation entirely.
In the case of reflection tokens, the unique algorithm set in its code is the tax imposed for each transaction and the rebate awarded to participating investors within the community. Most programs would impose a tax of around 10% per transaction, and this will then be divided equitably among:
- All holders (rebates)
- The liquidity pool (maintains the ease of exchanges with other currencies)
- Marketing funds, and, in certain instances;
- A burn wallet that removes the currency completely
Some wallets may impose a 15% tax for a 4% rebate, some would impose lower taxes for lower incentives, and some would position themselves somewhere along the middle of these extremes. The point is there is no one guideline as to how the transaction tax is allocated between these pools, but the general process in most reflection token wallets would virtually be identical.
How Do Reflection Tokens Function in the Way That They Currently Do?
Although incentives are being distributed to investors and token holders within a particular application, the token category still falls under the decentralized financial system as the programs that employ this would commonly integrate a smart contract in their mechanism instead of organic monitoring personnel.
A smart contract would serve as the functionality that would automatically redistribute tokens across all wallet holders and the wallets managed by the developers to keep the program running. Essentially, all that holders have to do is perform their transactions and manage their wallets carefully to avoid any online malicious attacks that might compromise the security of their funds.
This procedure is even more interesting because the automatic redistribution of transaction taxes encourages a hold-and-earn approach wherein users would prefer to have a token supply at all times to participate in the rebate mechanism. This essentially allows users to bypass the common “staking” mechanism in other currencies wherein the tokens are essentially loaned to the system to be put to use while still receiving staking benefits nonetheless.
Hyper-Deflationary Tokens vs. Reflection Tokens
In some cases, the mechanism of reflection tokens can be mistaken for the procedure commonly employed among hyper deflationary tokens – a cryptocurrency that rewards its holders in a slightly different aspect than reflection tokens.
For reference, reflection tokens are classified under deflationary tokens. In simple terms, deflationary tokens are currencies programmed to reduce the number of tokens in circulation as time progresses – causing an increase in the token’s value that will be beneficial among those who are more intent on holding the token. Like many other cryptocurrencies, Reflection tokens are inherently deflationary due to the necessity for a buyback and burn mechanism when stabilizing the market. However, this is not the primary mechanism in which users are rewarded by investing in the token.
Reflection tokens reward users through a rebate that is provided in each transaction. Any increase in value incurred by the buyback and burn processes imposed by developers would be circumstantial at best, depending on the token’s performance and the holding habits of users within the market.
Hyper-deflationary tokens likewise reward their users, but it does so by maximizing the concept of deflation in the crypto community.
Essentially, hyper-deflationary tokens would employ a smart contract that “burns” a certain percentage of tokens during each transaction. Burned tokens are then sent to a dead address, meaning that the token is now officially taken out of circulation – leaving the supply reduced by the amount burned.
Throughout its cycle, the token would consistently reduce in numbers, resulting in an appreciation of its price due to the supply that could no longer keep up with the demand. When this happens, investors who have held tokens would see profit from selling their tokens as they can redistribute the coins at a much higher price than when they purchased the currency.
Is it Worth it to Invest in Reflection Tokens?
Reflection tokens are certainly gaining more traction within the market as their main feature of passive income generation attracts those who might not have time to constantly monitor fluxes in the value of different currencies to ensure that they would be able to have their tokens appreciated.
While there is no one answer as to whether reflection tokens are worth it or, for that matter, safe to trade with in the long run, one thing that we can tell you is that you should always do enough research on a specific currency before investing your money into a particular token – especially if the coin is still relatively new within the markets.
Rug pulls and scams where developers pull their projects out after receiving funds from their investors are becoming some of the most infamous occurrences within the crypto community. Still, these are always avoidable with due diligence and comprehensive analyses of the features being presented by a particular program.
On another note, it is also highly advisable to only invest money you can lose, especially considering that the stability of several crypto programs fluctuates periodically. While this might seem like a pessimistic perspective on crypto investments, the sad truth is that scams do happen, and the only thing that can be done to prevent these is to know the signs before it comes hurtling towards you.
Reflection tokens are no different in this aspect.
Popular Reflection Tokens in the Market to Check-Out:
To give you an idea of how reflection tokens have been received within the crypto community, the following currencies are some of the most popular and most awaited tokens in the market – highlighting the features that you can avail of when the mechanism of reflection tokens is maximized in its light.
SafeMoon is a cryptocurrency that has seen a threefold increase in its value since its initial release on March 2021. The token is still relatively new, but it has seen such a massive boom despite being designed for early investors to only hold tokens for extended periods – one thing that they sure did not regret after seeing the appreciation in value as seen in the current data. Currently, SafeMoon is infamous for its extreme volatility, which would certainly seem like a gamble. Still, its consistently-trending name over social media shows that investors are more than willing to take a risk, calculated or not.
AnonyDoxx is a token currently in its late development stages that likewise boasts a native reflection token for its transactions. What makes AnonyDoxx stand out is its product incubation niche that allows developers to launch their projects while likewise ensuring that investors are protected with the help of their top-tier verification process or doxing. Overall, despite the relatively inferior reflection mechanism of AnonyDoxx, it does more than makeup for it with its security features that benefit both developers and investors alike.
DiveWallet is a token that is currently in its presale and initial sale stages, focusing more on the security lapses in common DeFi currencies than on the reflection being offered for each transaction, albeit the incentive is significant nonetheless. It provides notification systems and automatic disconnection functionalities accessible either through the stock or pro features separated by the acquisition of 500 million $DWT. If you prefer security over any other gimmick regarding cryptocurrencies, this might be a favorable option for you.
Ignite DeFi went another way and instead focused on allowing other developers to start their projects and subsequently release their tokens through the Spark launchpad – a feature offered by Ignite DeFi for aspiring and seasoned developers alike. Ignite DeFi still released a native token that will churn out a relatively substantial rebate amount for each transaction, but these tokens are mainly catered towards allowing investors to participate in the virtual casino that likewise comes with the program. If you are looking for innovation, this is probably the closest you’ll get to the word’s meaning.
Reflection Tokens: A Step Forward in the Right Direction
Evidently, reflection tokens have penetrated the crypto community through its innovative approach that mainly targets those who would prefer a passive income-generating method rather than means that will require consistent monitoring. While this might seem hopeful from an external perspective at first, it hit a significant population – resulting in a massive boom in its utilization and showing signs of a long-term progression that is not bound to stop anytime soon.
The verdict regarding its stability in extended periods is still under development due to the relatively new technology. Still, if current trends are anything to go by regarding its reliability, things are certainly looking good for everyone currently involved.