GlossaryAdvanced
Token Sink
A mechanism that permanently or semi-permanently removes tokens from circulating supply.
A token sink is a mechanism built into a token's design that removes tokens from active circulation — permanently (such as a burn) or semi-permanently (such as a long lock-up) — generally intended to offset new issuance or create ongoing demand for the token.
A well-designed token sink is one factor, among several, in assessing a token's supply-side economics over time.
Examples
- A protocol might design a fee-burning mechanism specifically as a token sink.
- Token sinks are one of several factors relevant to assessing a token's long-term supply dynamics.