Crypto glossary
Reflection token
A reflection token charges a fee on every transfer and redistributes part of it to existing holders, so balances grow just by holding the token.
The model spread on BNB Chain in 2021 with SafeMoon and its many copies. Each buy, sell or transfer pays a percentage, often 5 to 10%. Part of that fee is reflected to all holders in proportion to their balances, part may be added to liquidity, and part can be burned or sent to a marketing wallet. Holders see their token count rise without staking anything.
Projects pitch reflections as passive income and as a reward for not selling, and the mechanism became a hallmark of memecoins aimed at retail buyers. The rewards, however, come entirely from other people's trades: there is no external revenue, only fees taken from newcomers and sellers.
Because the yield depends on constant new buying, reflection tokens are often described as ponzinomics. Transfer fees make them incompatible with many DEXs and wallets, and the same code can hide excessive taxes, blacklists or owner-controlled wallets that collect fees. Several of the best-known examples ended in collapses or fraud charges.
Example
A memecoin charges 10% on each trade and reflects 5% to holders, so a wallet holding 1% of the supply receives tokens every time someone else buys or sells.