Reflection mechanism: transforming the concept of revenue in the DeFi ecosystem

A few months ago, the concept of reflection mechanism was just introduced in the cryptocurrency field. The reflection mechanism can be defined as a process in which a token acts as a self-generating mechanism for its holders. Since every transaction is taxed, users only need to automatically receive tokens by holding tokens. The development of this reflection mechanism aims to transform the concept of revenue in the DeFi ecosystem.

How does it work?

These DeFi tokens use a static reward system, which means that every transaction made with tokens using this mechanism is “taxed”. This means that each transaction adds a percentage to the liquidity pool, while the other part is set aside for redistribution among token holders. Therefore, the value of these tokens is self-generating and aims to promote a “hold and earn” culture, which reduces the pressure to sell. The reflection mechanism is completed through smart contracts, which automatically redistribute tokens. All these holders need to do is to manage their token storage wallets.

Projects using reflection mechanism

Since the concept of reflection mechanism was proposed 8 months ago, many new players have begun to enter DeFi and integrate this mechanism into their products. In the past few months, most projects have made significant progress, of which the SafeMoon project is particularly important. Only 5 months ago, it was launched on the Binance Smart Chain (BSC) and quickly rose to become the third most valuable token in the ecosystem. On their website, SafeMoon lists reflection mechanisms as one of their core components, explaining their rapid adoption in the cryptocurrency circle. Shiba Inu Token is another project that uses a reflection mechanism. Its decentralized exchange ShibaSwap has locked in a total value of $1 billion in less than a day after its launch.

The risks and rewards of SafeMoon’s reflective token model have not disappeared in the larger investment community. In a recent NASDAQ article on this new type of cryptocurrency, the author admitted that one of its attractions is that the cost of a single token is very low, “you can buy more than 1 million Safemoon for a few dollars.” It also There is an interesting selling point, which is to charge anyone who sells the game and distribute half of the cost to Safemoon holders. This is to benefit those who buy and hold. “At present, more attention is paid to the operation of the selling fee mechanism. The existing holders get 10% and the remaining 5% is allocated to the liquidity pool. The problem found by the security platform CertiK is that an owner’s address has obtained the pool code. Coins-Let them control tokens funded by seller fees. Despite these criticisms, Reddit investors have given strong support, especially a recent post from user @commecon on Reddit, which claims to be around SafeMoon the “FUD” and around the dog coins of “FUD” similar, and concluded, “SafeMoon is the best investment I ever made. I just need to stick to it. “In contrast, another contributor pointed out that “lack of transparency and clear communication.”

The app plans to launch iPhone and Android mobile apps at the end of August; in addition, a Reddit report emphasizes the movement of a large number of Safemoon tokens. Thomas (“Papa”@papacthulu) of the Safemoon team responded on Twitter: “The chain is obviously transparent. I did not hide it. The contract owner address is used exclusively for commercial purposes. In any case, the owner address The transactions of are not approved by others.” Although the main Safemoon Twitter account assured the community on the issue of the wallet application that despite the delay, the release of the wallet is still going on: “We as a community truly work together, Publish with #SAFEMOONWALLET. Our Beta testers are testing all night. Our developers continue to work hard! The release is just around the corner.”

Advantages of reflection mechanism

Although the reflection mechanism aims to solve problems such as selling pressure and excessive price volatility, other key problems solved by the reflection mechanism include:

  • Security: Since the generation and distribution of expenses are merged into a smart contract, the assets will be very safe without the approval of any external interface.
  • DeFi revenue generation: The reflection mechanism automatically rewards bonuses, allowing reflection token holders to use their tokens for pledge and other revenue generation purposes.
  • Fair distribution of the tokens won: Because the distribution process is automated, it is based on the number of tokens held by each user at the same time.
  • Repurchase and destruction mechanism: In order to ensure the life of their tokens, some reflection tokens use the reflection mechanism to automatically repurchase and destroy them. This leads to a deflationary effect, which reduces the supply of tokens in circulation and increases their value.

Reflected token distribution model

Due to the mechanism adopted, the distribution model of reflective tokens is significantly different from the distribution models of other tokens in the industry. It works by automatically levying taxes, usually a 10% tax after each transaction. This tax is then redistributed and shared among liquidity pools, marketing and development expenses, and reflection token holders. This is done to increase the transparency of the distribution model and maintain the right to know in the respective communities. On the blockchain, all wallets that charge a certain percentage of taxes are publicly available for effective tracking and accountability.

The advantages of reflection tokens in a bear market

Based on the current cryptocurrency market prospects, there are signs that a bear market is forming, which will seriously affect the price of cryptocurrencies. Most cryptocurrencies have experienced a sharp decline due to a large number of sell orders from holders. In this case, reflective token holders benefit from having a clear advantage in a bear market. Although a self-collection mechanism has been implemented, due to the “hold and earn” mechanism and the related culture it promotes, there is still an incentive to hold despite price fluctuations.

Reflection mechanism

In the field of cryptocurrency, reflection mechanism is a relatively new concept, and it still needs a lot of fine-tuning before it can be widely adopted and implemented by other projects. However, in principle, it minimizes panic selling, which may be of great significance to the DeFi industry. The touchstone is the performance of these tokens in the medium to long-term market. At this critical moment, such a token seems to be an exciting experiment.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/reflection-mechanism-transforming-the-concept-of-revenue-in-the-defi-ecosystem/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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