The crypto mania does not seem to end. With the entry of new players, the industry appears to be zooming way ahead. Recently DeFi, or decentralized finance, has become the center of all finance-related crypto projects. Specific DeFi tokens are helping users make more passive income than before. These tokens are also known as reflection tokens, and with them, the process of earning passive income has become much more straightforward for investors. Let us read some more about these Reflection tokens.
What Are Reflection Tokens
Also known as reward tokens, these are the tokens that reward a user by adding more crypto to their wallets. The other De-Fi tokens need you to add use investment mechanisms to gain crypto. On the other hand, reflection tokens pay the coin holder without them having to do anything like opening an account, moving any money, etc.
These reflection tokens are financed by percentage taxes in their native tokens. This tax gets redistributed almost instantly to the users having coins. The percentage of tax is dependent on the size of the holding they have.
In addition to that, the reflection tokens help the coin holders as they prevent significant drops in the price. When there are taxes in between, the holders with large values of a particular coin are discouraged, so they do not sell their tokens in one go.
These coin holders are also encouraged to preserve their tokens so they can get more reflection awards in the future. This ensures that the investors remain loyal to the project and don’t leave it in the midway. Blockchain technology ensures the process is secure, transparent, and audited.
Pros Of Reflection Tokens
- They increase the number of ways investors can earn from their holdings.
- The process of generating passive income is easy, transparent, and secure using smart contracts.
- It stops any fluctuations in crypto prices done by instant selling of the holding.
- Reflection tokens could be used to conduct any buybacks and coin burns which leads to an increase in price valuation.
- Reflection tokens are less affected by the volatility of the crypto industry.
Cons Of Reflection Tokens
- Most of the projects that employ reflection tokens do not have a solid business model.
- They are just in the nascent phase and are yet to be tested.
- There is a high transaction fee that stops investors from pursuing them.
Some Key Reflection Tokens
- EverGrow coin – EGC was launched last September, but thanks to the reflection system was quickly booming. They charge a 14% tax on all the EGC transactions, out of which 8% is immediately transferred back to the investors. However, EGC does not reward investors in their native tokens. They instead provide Binance stablecoin. So far, they have paid $35 million to their investors. They are also moving into the creation of a content platform to get more rewards for the investors.
- Safemoon- The Safemoon token was launched almost one year back. It is also one of the first few reflection tokens in the industry. Their project has a market cap of $2 billion with 2.5 million holders. They charge 10% on any transaction, where 5% goes to the investors, and 5% remains in their liquidity pool.
- Reflect Finance (RFI)- This is another reflection token that operates on the Ethereum network. There is a 1% fee for the RFI transactions, which then automatically go back to the investors. This amount is dependent on the size of the holding of each investor. The RFI holders can also use the tokens they have for staking and yield farming. This will not damage the RFI reflections they have.