Reflection tokens, also known as reflective tokens, are a type of cryptocurrency that employs a tokenomics model designed to reward holders with additional tokens. Unlike traditional cryptocurrencies, where rewards are typically gained through mining or staking, reflection tokens offer passive rewards to holders based on their token balance. These rewards are distributed automatically and directly to the holders’ wallets.
The functioning of reflection tokens is made possible through an automated token distribution mechanism known as “reflection.” This mechanism utilizes smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts eliminate the need for intermediaries and allow for secure and automatic token distribution.
Reflection tokens leverage a specific feature of smart contracts known as a reflection fee or redistribution fee. When a transaction occurs within the reflection token’s ecosystem, such as buying or selling tokens, a small percentage of that transaction is charged as a fee. This fee is then divided among all token holders based on their proportional ownership. Consequently, the more tokens a holder possesses, the greater their share of the reflection fee.
The distributed fees are typically awarded in the form of additional tokens, which are automatically reflected in the holders’ wallets. This process incentivizes long-term holding, as holders can see their token balance increase over time without needing to actively participate in additional actions like stalking or mining.