Cryptocurrencies have been making people money over the past few years. This is, in part, due to the rapid development of Decentralized Finance (DeFi) and the various projects that operate within it.
In fact, the DeFi ecosystem is evolving so quickly that multiple ways to earn passive income have emerged. One of these ways is through “reflection tokens”.
What Is A Crypto Reflection Token?
Let’s say you’ve invested in a cryptocurrency and held on to it for some time. You’re a part of the community and the project you’ve invested in wants to thank you by helping you make money with its crypto.
The crypto project figures out a way - it will charge a tax on every transaction in their project. A percentage of this tax will go to all existing holders as a reward. There’s another way to look at it.
The redistributed tax will reflect in an existing holder’s portfolio as a profit. That’s what a reflection token is in a nutshell - it helps you earn passive income through crypto transactions that are taxed.
How Does A Crypto Reflection Token Work?
Reflection tokens work by taxing all transactions in a project’s network and then redistributing a percentage of it as tokens to existing holders. This has benefits. An investor doesn’t need to move any money.
Nor do they have to sign up for a staking pool. All they have to do is hold the crypto to earn passive income with new tokens being reflected in their portfolio whenever the network taxes transactions.
The tokenomics of cryptos that offer reflections leverage the concept to reduce price swings, especially during the price discovery stage. Reflections are also known to encourage loyalty and long term investments.
The whole reflection mechanism is handled in a decentralized and transparent manner through smart contracts. The new tokens received as passive income through the tax fee can be publicly audited as well.
Steps To Earn Passive Income From Reflection Tokens
Some would argue that earning passive income through reflection tokens is less tedious than making money through staking or yield farming. Either way, general caveats apply. Let’s look at each one.
1. Choose The Right Reflection Token
Identifying the right reflection token is key. There are too many cryptocurrencies in the market and choosing the right one that fits your goals, has solid fundamentals, and other factors can be difficult.
That’s why research can be your best friend in an evolving domain like crypto. You could stand to benefit from evaluating factors including (but not limited to):
- Your risk tolerance and capacity to deal with losses
- Why you want to make money with reflection tokens
- The project’s fundamentals, core team, lifespan, etc
- The community involved in the project and their reviews
- The tax fee that’s redistributed as a reward
Or, you could turn to top-notch advisors like the ones TIKKA Token will give you access to. Either way, “learn and earn crypto" is an adage that’s gaining popularity for valid reasons.
2. Fund Your Trading Account
The next step is to add fiat money to your trading account. Remember, your risk tolerance will play a key role in determining this amount. This would be routed through your bank or you could use a swap as well.
A swap is basically a feature of the crypto world that lets you use one crypto to buy another. For example, you could use stablecoins worth $100 to buy any crypto worth the same price.
3. Invest In A Crypto Reflection Token
This is the business end of the process where you find hit buy and become an investor in a crypto reflection token. You could store tokens in a hot or cold wallet based on your investment ideology.
4. Hold And Earn Passive Income
You’ll earn a percentage of the fee that’s being redistributed as a reward by the reflection token. The rewards you earn will be directly proportional to what your existing crypto reflection tokens are worth.
Don’t forget - you’ll be subject to the same transaction tax that everyone else is. So, if you invest $100 and the transaction tax is 10%, your investment will be worth $90.
Top Crypto Reflection Tokens
Here we’ll list down some of the most popular crypto reflection tokens that are known to generate passive income. You’ll notice a pattern amongst these reflection tokens that we’ll touch upon later.
1. Safemoon
Safemoon is known to be one of the earliest reflection tokens. It charges a 10% transaction fee, 5% of which is redistributed to existing holders.
- Token Name: Safemoon
- Ticker: SAFEMOON
- Price: $0.0000005406
- All-Time High: $0.00001118
- Market Cap: $314,435,785
- Fully Diluted Market Cap: $537,004,707
2. EverGrow Coin
EverGrow Coin is a reflection token that charges 14% tax on transactions, 8% of which is redistributed to existing investors as a reward. The rewards are not in EGC but Binance USD.
- Token Name: EverGrow Coin
- Ticker: EGC
- Price: $0.000000457
- All-Time High: $00000325
- Market Cap: $225,058,069
- Fully Diluted Market Cap: $456,994,045
3. Tiki Token
This project requires you to hold at least 10,000 TIKI to stand a chance to earn rewards. Tiki charges a 15% transaction fee, 10% of which is converted to BNB and then rewarded to existing investors.
- Token Name: Tiki Token
- Ticker: TIKI
- Price: $0.00032
- All-Time High: $521.96
- Fully Diluted Market Cap: $318,863
4. reflect.finance
reflect.finance helps investors earn passive income by charging 1% as transaction fees, 100% of which is transferred as rewards to existing investors in proportion to their RFI holdings.
- Token Name: reflect.finance
- Ticker: RFI
- Price: $0.02534
- All-Time High: $2.8517
- Market Cap: $239,158
- Fully Diluted Market Cap: $253,354
Benefits And Risks Of Crypto Reflection Tokens
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Benefits
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Risks
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Reflection tokens generate passive income through crypto rewards
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Most reflection tokens are memecoins and do not have solid fundamentals
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Rewards generated are distributed using decentralized processes
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Typically high transaction fees
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Reflections are known to reduce volatility
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Relatively new concept that is yet to be tried and tested
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Conclusion
The purpose of reflection tokens is to help generate passive income and loyalty through the redistribution of rewards. The concept of reflection tokens may be sound but the projects themselves are new.
Most reflection tokens aren’t in the top 100 cryptocurrencies by market cap and are viewed as memecoins. That’s why it is important to do your own due diligence before investing in any reflection token.
Note: Facts & figures are true as of 25-03-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency.
