Fee-on-Transfer Glossary

Fee-on-transfer (also sometimes referred to as "reflection" or "frictionless yield") is an innovative mechanism utilized by certain tokens in the DeFi (Decentralized Finance) space. At its core, this mechanism automatically applies a fee on each transfer of the token, redistributing or utilizing this fee to benefit holders or for various other project goals. Let's delve deeper into its technical aspects:

Fee-on-Transfer: The Basics

1. Fee Imposition: Whenever a token transfer occurs (from address A to address B), a predefined percentage of this transfer is automatically deducted as a fee.

2. Redistribution: Often, a portion of the deducted fee is redistributed to all existing token holders. This incentivizes holding onto the token as you receive more tokens over time just by holding.

3. Other Uses: Depending on the token's protocol, the deducted fee could be used in various ways apart from redistribution:

   • Liquidity Pool: Some tokens use a portion of the fee to automatically add liquidity to the token's trading pair, making the token more stable and less prone to large price swings.

   • Burn: To create deflationary pressure, some tokens automatically burn a fraction of the fee, reducing the total supply over time.

   • Project Funding: The fee can be directed to a project wallet to fund ongoing development or marketing activities.