GlossaryAdvanced
Token Velocity
How frequently a token changes hands within a given period.
Token velocity measures how frequently a token changes hands (is transacted) within a given period relative to its total supply — high velocity generally means tokens are being actively spent or traded rather than held.
Some tokenomics designs specifically aim to reduce velocity (encouraging holding) through mechanisms like staking rewards, based on the view that lower velocity can support price stability, though this remains a debated area of token-design theory.
Examples
- A token used primarily for quick transactions tends to have higher velocity than one primarily held long-term.
- Some tokenomics designs specifically incentivize holding to reduce token velocity.