The Straw That Broke the Camel’s Back in the Crypto Vs Fiat Debate?
As if there weren’t enough exciting wealth accumulation protocols stacking up against the archaic fiat currency mechanisms such as bonds, ISAs, and incredibly low interest rate returns – it appears as though there is a new piece of tech that has the industry talking. Static Reflection.
Before we take a dive into these developments , let’s take a run through of some of the “basic” existing concepts at play: Yield farming, staking, and liquidity mining have all had a key role to play in the market since the recent DeFi boom. Enabling investors to generate interest on their tokens by “locking” for certain periods of time in secure protocols. While in theory this is appealing, such protocols do have some disadvantages: the irreversible loss of the asset in terms of its value. Even if you earn interest on your crypto assets, if the value of the underlying token changes dramatically, the value of your tokens will rise far less than if you simply retained them.
In typical crypto fashion, as a result, we’ve seen another step taken in innovation through the introduction of reflective tokenomics, often known simply as static reflection, or even just reflection, a distinct idea that aims to alleviate the difficulties associated with farming rewards. The reflection concept is dependent on volume by nature of design. This mechanism counteracts the negative sell pressure on a token caused by early holders – i.e., early-stage investors, advisors, and founders liquidating their holdings. The crypto lingo also terms this as “Rug pulls”. The reflection mechanism also incentivizes holders to retain their tokens in order to earn larger returns that are of course proportional to the owner’s holdings. The reflection system can in a short period of time literally double the profit for holders that hodl their tokens for the longest stints of time. In short, token holders gain rewards every time a token sale takes place. In some cases, holders are even able to gain rewards in other tokens, USDT for example. This is usually the case where there isn’t such a high token supply, and such a reduction in the supply would not be sustainable long term. Whenever there is a sale of tokens, for example with SafeMoon, there is a 10% tax, with 5% being burned and 5% going to existing holders as a reward.
A very strong case can be made for reflective tokenomics, as it solves a number of issues within decentralised finance. There are problems associated with DeFi smart contracts such as market risk and price risk, risks associated with trust, security vulnerability, and economic risks related to its design. However, static reflection is suited to addressing these issues and mitigating the dangers detailed above. An example of an exciting project set to launch early September is that of Omnia DeFi which has a static reflection distribution of 12% to all $OMNIA token holders in USDT, BNB, USDC, DAI, BUSD, ETH, or a mixture of the aforementioned. So watch this space- as static reflection may just end up being an absolute must for any and all projects new to the space