A demand sink is any mechanism that creates real, recurring demand to acquire or hold a token. Flow demand is recurring buy pressure such as paying a fee in the token; stock demand is persistent lockup such as staking for access. A token with no designed demand sink has no structural price floor.
Usage is not demand for the token unless a mechanism explicitly connects the two. A service can scale wildly while its token sees no incremental demand at all.
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How it works
A sink describes the supply-side removal of tokens; a demand sink describes the demand-side pressure to acquire them. In practice many mechanisms do both at once. A staking requirement for node operation removes tokens from circulation and forces ongoing acquisition from operators. Understanding that dual role is essential for modeling price under growth.
How it is calculated
The strength of a demand sink is measured by its inelasticity to price. An inelastic sink still requires acquisition even as price rises, because the activity it enables is worth more than the cost. A node operator under contract to process jobs must buy tokens regardless of spot price.
An elastic demand sink collapses when price rises, because the activity becomes optional or has a substitute. Many liquidity mining programs are elastic: participants leave once dollar rewards fall below their opportunity cost.
Example
The clearest strong demand sink is a fixed token collateral requirement before providing a service. As the number of providers grows, so does aggregate collateral demand, linking adoption to token demand without leaning on speculation. The failure mode is confusing demand for the token with demand for the service, which the collateral structure avoids by design.
See Tokenomics Design Services for how this applies in practice.
Related terms
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