Deflationary token
In short A deflationary token is designed so its supply shrinks over time, usually by burning a share of tokens on each transaction or through regular buybacks.
A deflationary token has rules that reduce its total supply over time. The usual tool is the burn: tokens are sent to an address nobody controls or destroyed by the contract, so they can never circulate again. The pitch is simple: if demand stays the same while supply shrinks, each remaining token represents a larger share.
There are several mechanisms. Some contracts burn a fixed percentage of every transfer, such as 1% of each buy or sell. Others collect fees and periodically buy tokens back from the market to burn them. Some networks burn part of the transaction fees users pay, which can make supply shrink when activity is high and grow when it is low, so the deflation depends on usage.
For holders, the key point is that burns alone do not create value. A 2% burn on a token nobody uses barely matters, and transfer burns act like a tax that makes trading more expensive. Also check what burned really means: tokens moved to a wallet the team controls are not burned, and burning tokens from a team allocation that was never going to be sold changes little.
Read the contract to see whether the burn rate is fixed or adjustable by the owner, and whether a mint function could quietly undo the burns. Compare the real supply reduction with any issuance from staking rewards or emissions. On small tokens, burn taxes are often stacked with other fees, so the total cost of buying and selling can be much higher than it looks.