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What are Reflection Token in Crypto? – Analytics Insight

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DeFi (decentralised finance) is the core of crypto’s fastest-growing projects right now. Terra’s LUNA token for example is posting the highest gains of any top 20 cryptos as of March 9, with 19% growth in the last 24 hours. In essence, DeFi tokens like LUNA allow investors to make extra income through their crypto holdings. In practice, the process is a lot more complex.
Enter reflection tokens. This new breed of crypto simplifies substantially the process for investors to make passive income from their investments. Reflection tokens are fast attracting experienced crypto traders, but also allow crypto newcomers to join without learning about yield farming, staking, and liquidity mining. 
So what are reflection tokens in crypto and how do they work?
 
Reflection tokens (sometimes called ‘rewards’ tokens’) refer to any crypto-asset that rewards holders by adding new crypto to their wallets. Earning extra crypto is the end goal of other DeFi investment mechanisms like staking and yield farming. However, reflection tokens pay coinholders without them having to move any money, sign up to any staking pool, or even having to check their crypto wallet. 
Reflections are usually financed by a percentage tax on any transaction in the native token. The tax is redistributed instantly to coin holders, most often according to the size of their holding. 
Aside from passive income generation advantages, reflection tokens also help to prevent large price drops. This is both because taxes discourage whales (individuals holding a large amount of a specific coin) from selling up their positions and encourage investors to hold onto tokens for greater reflection in the future. Reflection tokens keep investors loyal to a project.
Reflection mechanisms employ smart contracts that automatically distribute tokens across holders’ wallets (often also a liquidity pool and/or a burning wallet). Blockchain technology makes the process instant, transparent, and publicly audited.
 
 

 
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Analytics Insight is an influential platform dedicated to insights, trends, and opinions from the world of data-driven technologies. It monitors developments, recognition, and achievements made by Artificial Intelligence, Big Data and Analytics companies across the globe.
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