Crypto glossary
Token sink
A token sink is any mechanism that removes tokens from circulation or locks them up, such as burns, fees, staking or in-game spending, to offset emissions.
Sinks are the counterweight to faucets, the channels through which new tokens enter circulation. Common sinks include burning part of each fee, requiring tokens to mint items or upgrade characters in a game, locking them for governance power or staking rewards, and charging them to register names or access premium features.
The term comes from game economics, where designers learned that rewards without sinks lead to runaway inflation. Play-to-earn games in 2021 and 2022 showed the problem clearly: players farmed tokens faster than the game could absorb them, and prices collapsed. In DeFi and infrastructure tokens, sinks are part of the case for long-term demand.
Not every sink is equal. Burning removes supply permanently, while staking or locking only delays it, and those tokens can return to the market later. A sink is also only meaningful if users want the thing it buys; forced spending in an unpopular product does little. Compare sink volume with emissions to judge net effect.
Example
A blockchain game requires players to burn its token to breed new characters; during a busy month the burns exceed the tokens paid out as rewards, so circulating supply falls.