Reflection tokens are cryptocurrencies that reward holders through a mechanism in which transactions are taxed and a percentage of the tax is redistributed to token holders.

One of the motivations for the tokenomics of reflection tokens is to avoid the large price drops that new cryptocurrencies frequently face during their price discovery phase at the hands of whales.

Furthermore, because holders are rewarded with new tokens, the mechanism encourages investors to keep their tokens for the long term. As a result, reflection mechanisms are regarded as an effective means of keeping investors committed to a project.

While DeFi tokens typically allow investors to earn an investment income through staking, liquidity mining, and yield farming, reflection tokens are gradually becoming another way for crypto assets to earn yield.

Crypto reflection tokens are a type of cryptocurrency that automatically distributes a portion of transaction fees back to existing token holders. This mechanism, also known as "reflecting" or "redistributing," incentivizes holding the token by providing passive income. Every transaction, such as buying or selling, incurs a fee, part of which is redistributed among all current holders based on the number of tokens they possess.

Reflection tokens aim to promote long-term investment and reduce selling pressure. They often incorporate additional features like automatic liquidity provision and burn mechanisms to further stabilize and enhance token value. Popular examples include SafeMoon and EverGrow, which have garnered attention for their innovative approach to rewarding investors and fostering community engagement.