# Deflationary Tokens

## To fight against Inflation, deflationary mechanisms are also a must. 

<figure><img src="https://1136955223-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FSDEn8Abdjo8l8Nioue3a%2Fuploads%2FFIMQuyktWlXwVjrdd8X4%2Fdefationary.png?alt=media&#x26;token=1fbae8c0-c25c-42d1-b496-eb658bb82014" alt=""><figcaption></figcaption></figure>

In addition to the hardcap set on $GND (which also includes $xGND, the escrowed version of $GND), we also implemented some deflationary mechanisms in order to reduce the total supply. <mark style="color:green;">**Here are the methods GND Protocol is going to use on our $GND governance token:**</mark>

### 1. Buyback & Burn

A share of the protocol earnings (40-60%) is dedicated to buyback & burn, in order to apply continuous buying pressure on it.

### 2. xGND Redemption

When converting xGND to GND, if the vesting duration isn't the maximum, the xGND:GND ratio will be lower than 1:1, down to a minimum of 1:0.5. All of the GND excess will automatically be burned.

For instance, if a user redeems 1000 xGND with the 20 days vesting duration, he will obtain a 1:0.5 ratio, and receive 500 GND in the end.

That means a total of 1000 - 500 = 500 GND will be burned during the process.

### 3. xGND deallocations

When XGND is staked, a deposit tax is applied. It can vary between contracts, but will usually be 2%.

The corresponding GND amount will automatically be burned.\
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Supply will also be controlled as people convert their GND to xGND to participate in the protocol.

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