A friend of mine once asked me: "Project parties always say they want to 'deflate', burn coins, destroy them, what are they doing? What's the point?"
Today, let's talk about this issue - one of the most common and easily misunderstood concepts in the crypto world: Token Deflation.

What is deflation?
In one sentence: Deflation = fewer and fewer tokens, but the price may be getting higher and higher.
For example, a project initially issued 1 billion tokens, burned a little every day, repurchased a little, locked a little, and as a result, only 300 million tokens were left on the market after 5 years. Then, if market demand remains unchanged or even increases, the unit price will naturally go up.
Simply put, it's like the pancake vendor downstairs in your house suddenly saying: From now on, I will only make 100 pancakes a day, first come first served. Do you think this pancake is more valuable or cheaper?

Burning coins = really burning money?
Not entirely!
Many people think that "burning coins" is the same as the project party burning their own money. This understanding is half right and half wrong.
✅ Projects that really burn money: For example, using project income to buy back coins on the market and then destroying them. This is equivalent to buying coins back from the market with "real money" to burn, which is a real burn.
⚠️ Projects that pretend to burn money: Printing coins and directly destroying half of them, but no one pays for them and no one trades them. This kind of "destruction" is just a gimmick in the PPT and has little meaning.
So, don't just look at "how much was burned," but also look at "where the money comes from and how it is burned."

Why do many projects love to engage in "deflation"?
In short, just two words:
Sense of value.
In the crypto world, scarcity = value. No matter how many coins you issue, if no one cares about them, they are just air. But if you can make the market feel that this coin is "used less and less" and "more and more people are using it", then there is room for speculation, locking, and FOMO (fear of missing out).
Here's another example:
Why is $BTC valuable? Because there are 21 million coins, it's written in stone, and no more will be issued.
Why did $SHIB also implement a destruction mechanism later? Because there were too many at the beginning, and they felt worthless if they didn't burn some.

Attention! Deflation ≠ skyrocketing!
Here's a reminder:
🔥 A deflationary mechanism does not mean that the price of the coin will definitely rise!
Project deflation is just an incentive design and a way to support value. What really determines the price of the coin is market sentiment, user demand, actual implementation, team operation, etc.
You see, LUNA used to say that it was "algorithmically deflationary", but in the end, it turned into "algorithmic zeroing"...

Summary
A deflationary mechanism is not magic, but if it is designed reasonably, the funds are real, and users buy into it, it can effectively enhance the value anchor, incentive mechanism, and even community belief of the token.
Therefore, deflation is not a guarantee of profit, but it is indeed one of the important signals we use to judge whether a project is "doing things seriously".

Coin Observation Summary:
In this circle, there are always projects playing "subtraction", but we must learn to do "addition":
Ask more "why burn, how to burn, where does the burning source come from"
Be less fooled by rhetoric such as "95% will be destroyed in XX years"
Look more at real income, real repurchase, real use cases
You say, looking at deflation in the crypto world is just looking at whether the project party has a conscience.
✍️Thanks for reading, this article was written by [Coin Observation]
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