What are Reflection Token in Crypto? – Analytics Insight

What are Reflection Token in Crypto?


Reflection token is set to reflect extra income in crypto wallets in 2022

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?

Crypto reflection tokens – an easy way to make passive income 

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.

Examples of key crypto reflection tokens
  • EverGrow Coin (EGC). EverGrow Coin only launched in September last year but broke records on the BNB Chain for rapidly gaining investors through a unique reflection system. EverGrow Coin charges a 14% tax on EGC transactions with 8% instantly distributed to investors. However, EverGrow Coin does not reward coinholders in its native EGC token (like SAFEMOON). Instead, EverGrow Coin pays out reflections in the stablecoin Binance USD (BUSD). EverGrow Coin has paid over $35 million in reflections within 5 months and is developing new applications (like the world’s first crypto-integrated content subscription platform, Crator) to generate even more rewards for loyal investors.
  • Safemoon (SAFEMOON). Safemoon launched just over a year ago and was one of the first reflection tokens in the crypto industry. The project has won over 2.5 million holders with a market cap of $2 billion. Safemoon’s smart contract charges 10% on top of any SAFEMOON transaction, with 5% distributed to investors and 5% going to Safemoon’s liquidity pool. 
  • Reflect Finance (RFI). RFI is a reflection token on the Ethereum network. It applies a 1% fee to RFI transactions which are automatically distributed among coinholders. The amount is dependent on the size of each investors’ position. RFI holders can also use their tokens for yield farming or staking without damaging RFI reflections. 

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