Deflationary and Decentralized Tokens: The New Era of Cryptocurrencies
The main difference between inflationary tokens like Dogecoin and deflationary tokens like Burnedfi lies in how the supply is controlled. Inflationary tokens have a continuous issuance of new coins, increasing the total supply over time, which can reduce the individual value of each token. For example, Dogecoin has no maximum supply limit, meaning new coins are created indefinitely.
In contrast, deflationary tokens like Burnedfi adopt a “burn” mechanism to reduce the total supply. Instead of issuing more tokens, a portion of transactions is destroyed or removed from circulation, decreasing the supply over time. This creates a scarcity effect, which can increase the token’s value as demand grows.
In summary, while inflationary tokens tend to lose value over time due to the increasing supply, deflationary tokens offer a value proposition through scarcity.