Deflationary Token Economic Model. A token economy is a system of exigency management that is based on the organized reinforcement of target behavior.
Those reinforcements are signs or tokens that can be exchanged for the rest reinforcers. A token economy is simply based on the principles of instrumental conditioning as well as behavioral economics.
And this can be located within applied behavior analysis.
In an applied setting, token economics is used with both adults and children. But they have successfully been modeled with pigeons in lab settings.
Top Best Token Economic Models
Token Economic models are widely superior to one of the government-controlled economics models. And the reason is that the models are being developed in code with mathematical rules.
It is being governed by a decentralized network that makes decisions collectively as a community.
Compare this with central banks who have got the energy to print money on a notion and make monetary decisions without having to input currency-holders.
Still, no economic model is best, mostly those that are new and have not been proven. Let’s now take a look at the different token economic models, the benefits, and of course, their disadvantages.
The very first one on our list is the:
Deflationary Token Economic Model
A deflationary token model is one where tokens are being withdrawn from the market over time. Tokens can be withdrawn from the market through different methods. Not excluding taken burns and token buy-backs from the token creators.
The benefit of this is that it has a limited supply of tokens which gives rise to natural demands as the supply decreases. It also removes completely the worry of inflation which afflicts fiat currencies.
However, what you might not so like about the deflationary token model is the limit to the number of tokens being produced.
Some people wonder if the incentive structure in a deflationary model will in the long run result in its downfall.
The reason is that there is a limit to the total amount of tokens that were being produced. So many users are being motivated to reserve and stockpile tokens, and not spending them.
Without too much spending, most of the tokens will go out of circulation and the token will become less useful.
And examples include Cardano (ADA), Bitcoin (BTC).
An inflationary token will keep being printed over time, having no controlled limit of tokens that can be created ever.
The benefit of this economic model is the fact that it is the most popular and most studied economic model since it nearly looks like fiat currency.
Thus, there are little or no questions around the model viability. Since it has been displayed to majorly work having fiat currencies.
However, what you might not so like about the inflationary model is the money printer.
Just like the fiat currencies, the economic model can keep printing their currency until the end of time. And this can result in runaway inflation as well as token depreciation.
Examples include EOS (EOS), Ethereum (ETH).
Other economic models include:
- Asset-backed model.
- Duel-token model.
Deflationary Token Economic Model Behind Current $CRNC
To understand fully the deflationary model behind $CRNC, the very first thing you should know is why Current decide not to directly combine $CNRC into their ecosystem. And rather, resolved on an in-app currency, which is known as “Points”.
While building their models, they needed a steady means of exchange which was adopted with ease by global consumers.
According to them, they could have pleased the early requirements with actual variable pricing and a greatly designed user experience.
But, the model also had some complications when it considered the different regulatory and compliance requirements from various dominions worldwide.
In the end, they built a model that suits all their requirements. And also does not need any additional outpour of supply.
Their Points system offers a steady method of exchange with no extra onboarding for the user, no zero volatility, no paradox of choice between $CRNC Tokens.
Other cryptocurrencies or fiat and the last but not the least, practically no analytical tax on the user. The reason is because of the expense of having to keep writing to the blockchain.
So as to match up the value of the $CRNC token to the usage and the recognition of the Current App, they planned on introducing different deflationary mechanisms.