What is dilution in the context of cryptocurrency?

1 answers

• Armand ShemaMay 13, 2023 · 2 years ago
  In the context of cryptocurrency, dilution refers to the increase in the total number of coins or tokens in circulation. This can occur through various means, such as initial coin offerings (ICOs), airdrops, or mining rewards. Dilution can affect investors by reducing the value of their holdings. When the supply of a cryptocurrency increases, the demand may not keep up, leading to a decrease in price. However, dilution can also be seen as a necessary process for the growth and development of a cryptocurrency ecosystem. It can incentivize participation and provide funding for projects. It's important for investors to understand the potential impact of dilution and consider it as part of their investment strategy.
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