Deflationary Token
A token whose total supply decreases over time, generally through an ongoing burn mechanism, as opposed to one whose supply grows through issuance.
A deflationary token is one whose total supply decreases over time, generally through an ongoing token burn mechanism (see Kaavon's "Token Burn" glossary definition) that removes units from circulation faster than any new issuance adds them — the structural opposite of an inflationary token (see Kaavon's "Inflationary Token" glossary definition).
A shrinking supply alone doesn't guarantee a rising price — price depends on the relationship between supply and actual demand, not supply trend in isolation, a genuinely important distinction worth keeping clear rather than assuming "deflationary" automatically implies "appreciating."
Examples
- Ethereum's net issuance can turn deflationary during periods of high network activity, when EIP-1559's fee burn exceeds new issuance to validators.
- A deflationary supply trend doesn't by itself guarantee a rising price — that depends on how demand changes too, not supply trend alone.