When I was new to Crypto, i joined some Telegram groups and when I saw something like;
💥 BOOM!! 💥 2 $BOMB have been destroyed in the last hour
💣 Remaining: 955,326 $BOMB
🔥 Burned: 44,674 | Rate: 14/d
💀 Last $BOMB expected: 2206
🏦 Market Cap: $602K
💸 Volume: $33.8K
📉 Price: $0.63 (-5.89%|24h)
It always got me confused as I didn't understand what it meant. Well I later got to understand what it meant and now I want to educate those who might not also know what it means.
In the Crypto space, there are different token models each with their different models and perks. But these tokens are largely grouped into 2 categories that is; inflationary token or deflationary tokens. For an Inflationary token, tokens are added to the market at specified periods of time. E.g, 12.5 new BTC (to be cut in half after the halving coming up in May) are added every 10 minutes as rewards to miners for their work. Ripple (XRP) also uses an Inflationary model, but for them 500 billion XRP is released by the company to the market from escrow wallets every month and they gradually sell it off.
Deflationary tokens are however different. For these, instead of coins being added to the market,they are eliminated by being “Burned”. There are various ways in which the companies can choose to remove the coins. For some they buy back, while for others a certain amount of a token are burned whenever you make a transaction. The major reason why many support deflationary tokens and buy them is because they believe it grows in value. Let me explain it like this, we all know this market is about supply and demand. When the demand for a coin is high, the price goes up. And so because deflationary tokens are burned, it creates a kind of scarcity for them and when a token is scarce it can increase demand for it and in turn increase the price.
