> For the complete documentation index, see [llms.txt](https://gmd-protocol.gitbook.io/gnd-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://gmd-protocol.gitbook.io/gnd-protocol/gnd-protocol-overview/deflationary-tokens.md).

# Deflationary Tokens

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

<figure><img src="/files/ts05IdcPf9ApjI9Rfeg9" 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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