Sinks for tokens should come from the outside

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Avatar for bala41288
3 months ago

When we are introducing a token in the market, most of the time we think of creating a use case or utility for the token. This is a very good thing. But at the same time, it is also important to create a sink for the token. Most people think that it is sufficient to create more use cases for the token for the tokenomics to sustain very well. But only if we keep increasing adoption and increasing the userbase, we will be able to keep the token price stable. Otherwise, the inflation would be very high and the sink would be very low.

Creating a token is just one part and there are numerous facilities available these days and many blockchains provide a facility to create tokens. One of the biggest challenges with the tokens is maintaining the demand and supply of the tokens. After a few months or years of launch, in most of cases, the tokenomics might be affected if it is not managed well.


Revenue source should be outside

I personally think that there should be sinks for a token from the outside world. It can either be in the form of another passive income to the project or a facility to sell something in the outside world to create a sink for the token. Real-world production and sale can be dependent on a token in the crypto world. When people sell some products in the real world, they can distribute the profits to the token holders in the crypto world. If not the revenue distribution, it can at least be used to increase the value of the token in the crypto world.

Buying the token back from the market regularly

When we have a successful technique to make revenue outside the regular tokenomics of the token, it should be possible to allocate some of those funds to buy the token back from the market. This will definitely act as a great sink. Some projects buy the token back from the market and they burn them to increase the value of the token.

We need regular investors who are able to purchase tokens from the market regularly for their needs. Let's assume there is another project that is dependent on this token. Let's say people will have to buy this token from the market regularly in order to keep their positions in the second project. This is a good buying pressure for the token from other sources.


More use cases to push people to purchase the token

I already explained this in the previous paragraph. There should be a need for people to purchase this token from the market. There should be real-world use cases that are bound to this token and most of the time either all the tokens that are used to buy or at least a part of those tokens should be burnt. This will act as a great sink for the tokens.

If we have a successful token, there can be projects created as side projects to these and the same token can be used as a utility on the other projects so that when more use cases appear, people wish to purchase the token from the market.

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Avatar for bala41288
3 months ago