Follow the Trends – Follow the Money
Humans are social animals who, in general, enjoy living and working within social groups and adhere closely to the norms and rules dictated by the group. Markets are no different and are formed as a byproduct of social groups to facilitate trade and increase the flow of goods and services within the group. By analyzing the flow of money in a market we can determine trends and make informed investment decisions based on that information.
The latest trend in Crypto and more specifically in DeFi is the Reflectionary Token.
So what is a Reflection Token? And how can we follow the trend to make money?
Reflectionary Token Defined
A Reflectionary Token is a token that distributes a percentage of every transaction back to it’s holders, usually the rewarded percentage is distributed in it’s own token – that is, if you hold Reflection Token X you will be rewarded in Reflection Token X. Transactions with the token are taxed at a fixed rate which is used to pay the reflection rewards directly to holders.
Reflect.Finance was the first coin to implement a reflexive relation within its smart contract and thus the first to reward holders back with it’s own token for simply holding.
In theory, transaction fees in combination with rewards paid out to holders should incentivize holding and provide for a more stable token price or upward trend. But, similar to native farming tokens, when
a system mints and rewards investors in the same token that they hold massive sell pressure is created by inflating the token supply with rewards.
The reward structure defined by reflection provides the most rewards for diamond hand holders. Those who can hold through market volatility are rewarded with the transactions of the paper handed. For the first time rock beats paper…
New Token Rewards
In standard crypto fashion a wave of memecoins and copy pasted code hit the market following the success of reflection pioneers like Shiba Inu, Safemoon, and Bonfire. But through the fog of doges and
baby coins innovation is seen in the market with another type of reflection – a token which, when held, rewards you in a separate currency. So for holding Reflection Token X investors are rewarded in Token Y.
An example of the new reflection reward structure is BabyBUSD which is a unique BEP-20 token that rewards holders with 10% of transfer fees sent to holders in BUSD.
Coins of this style reduce the sell pressure by rewarding holders in a seperate coin, which many investors find more appealing. There are Reflection Coins paying in just about any major cryptocurrency including cake, dot, bnb, btc, and even eth.
Another interesting development is reflectionary tokens being used to offer a basket of rewards in the style of airdrops to holders. Transaction fees can be used to buy a varying set of coins distributed to holders chosen by way of vote or developers choice. An example of this can be seen with BabyBSC.
Projects like BabyCupCake offer rewards in BabyCake which means by holding BabyCupCake you passively earn BabyCake which passively earns you Cake which earns you Cake.
Too Good to be True?
A contract paying holders in its own coin based on transaction fees should raise questions concerning Ponzi schemes. Especially if the coin and it’s transactions are used solely for speculation and not used for trade or
service. A Ponzi scheme has a few elements to it which can be fulfilled by reflection tokens and so personal research has to be done before investing.
Key Elements of a Ponzi:
- Using new investor funds to pay prior investors
- Falsely representing that the investors returns are generated from a purported business venture
- Employing artificial devices to disguise the lack of economic substance or defer the recognition of economic loss
How Reflections Compare
- Reflection Tokens pay prior investors with new investor funds through transactions taxes when entering the coin. On the flip side they also pay new investors with prior investor’s funds when a holder sells the coin.
- Smart Contracts should be open sourced, transparent, and auditable. Open code makes false representations or artificial devices designed to disguise economic loss much harder or impossible to achieve through smart contract. Projects can still engage in a Ponzi with clean code and research must be done outside of just auditing code.
What about Rugpulls?
Although there is no additional risk with reflectionary tokens in relation to rug pulls, when following the latest trends remember that scammers also follow trends and follow money. One thing crypto experts like @MaddCryptoDogg want people to know is that “rug pull[s] [are] possible if the contract has not been renounced of ownership.”
Reflectionary Tokens are not by design Ponzi schemes or rugpulls although individual projects may use the popularity behind the market trend to scam investors.
How to Buy
In order to follow these instructions you must be familiar with buying from and exchange, sending funds to Metamask, and interacting with Web3 contracts.
- Copy Contract Code for Token you Want to Hold
- Add Token to MetaMask
- Select Token you Wish to Trade for
- Paste Contract into PancakeSwap Exchange
- Approve and Swap
- Hold and Receive Rewards
A Reflectionary Token is a token that distributes a percentage of every transaction back to it’s holders, usually the rewarded percentage is distributed in it’s own token – that is, if you hold Reflection Token X you will be rewarded in Reflection Token X.
Another type of reflection exists- a token which, when held, rewards you in a separate currency. So for holding Reflection Token X investors are rewarded in Token Y.
Reflectionary Tokens can be a great way for investors to receive a passive income, especially if you can get in early on a solid project.
Written By Garrett Mckeown
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