Do deflationary tokens increase in value?

Deflationary tokens aim to minimize their market supply, and increase scarcity and demand. This directly implies that their value rises with time. However, crypto projects use different deflationary measures that are worth considering.

Binance, for example, burns its native coins (BNB) each quarter to minimize its supply. On the other hand, Ethereum’s native currency (ETH) was once an inflationary asset. But the Beacon Chain Upgrade of November 2021 required the network to destroy some tokens when activities surge, making ETH a deflationary token. According to the tracking company Watch the Burn, almost 2 million ETH worth more than $4.5 billion have been destroyed since then.

Ripple also applies a unique deflationary method. Initially, it issued 100 billion XRP coins as a bundle. In 2017, it locked 55 million of those tokens and issues them periodically to achieve liquidity. Besides, Ripple burns its transaction fees to maintain XRP’s deflationary nature.