Anyone new to the reflection token must know that reflection tokens are the source for investors to get passive returns on their assets. The growth in the Defi ecosystem has led to an increase in yield farming, liquidity mining, and staking. Now the users are ready to accept interest on their investments.
This enables the user to increase their interest in the market. It seems so good but there is a risk regarding this development. There is a risk of potential decline in the assets.
In other words, if the asset’s value drops then the investors will have to bear the consequences. They are removing the necessity of locking tokens, but they continue to offer the benefits. However, risks are still there to consider.
What Are Reflection Tokens?
Those who have been backing the reflection tokens are there to pay a penalty tax which is due on each transaction. The fee is provided to the account holders according to their assets.
Consequently, the holder doesn’t keep their assets for the long term so that they can earn the awards. The awards are available more quickly than before. Investors are also able to send their funds to a third party so that they can earn additional yields.
Popular Reflection Tokens:
The most popular reflection tokens of all time are;
- SafeMoon, BabyFloki,
- Fly Paper(STICKY),
- MinersDefi (MINERS), and
- EverGrow Coin (EGC).
We can understand this through an example, EGC price dropped to 98% but it happened when it reached $0.0000039298 in November 2021. 2% of it is distributed to the EGC holders in form of USD.
EGC has a very low volume which can make them sell their assets.
Risks Associated With Reflection Tokens:
As explained earlier that the reflection tokens are the door to a passive income for many and instant reward distributions. With every gift comes risk and this risk can, nevertheless, let them have a high-rate impact on investors’ profitability.
- Transaction Tax
Whenever users buy and sell reflection tokens. The beginners have to pay a transaction fee to get the token, but they can recover that if the project has a gain in adoption. Consequently, the investors can get a result in more than three months.
Scammers are there to ruin the reflection token as they do with other digital tokens. They can create a dupe and make the investors pay the transaction taxes and then they would abandon the project and refuse the invested funds.
- Uneven Returns
Reflection tokens are there to give the investors benefits, but they are not available for consistent results. It depends on the luck of the person. The assets of the investors and their daily day-to-day value let the reflection tokens work out for them.
Many investors invest without even realizing the possible consequences. The experienced investors have bear zero returns too and hence there is a possibility to have zero yields. Nevertheless, this happens if there is no activity in the network.