4.4.2 How secondary tokens are produced

In the DGT ecosystem, the concept of secondary tokens represents a fundamental shift towards more advanced tokenomics. These tokens aren't primary assets but are derived from or related to primary tokens, thus the term "secondary". Their introduction serves multiple purposes and can have a profound impact on the ecosystem:

• Staking and Rewards: One common way secondary tokens are generated is through staking. When users lock up or "stake" their primary tokens, they may earn secondary tokens as a reward for their commitment. This process not only provides liquidity but also helps in stabilizing the token's value.

• Collateralization: Another method is collateralized loans. Here, users can lock up their primary tokens as collateral and receive secondary tokens as a loan. These secondary tokens often represent a claim on the collateralized primary tokens.

• Token Burning and Minting: Some protocols adopt a burn-and-mint mechanism. When primary tokens are burned, an equivalent number of secondary tokens might be minted as a representation of the burned value.

• Farming: In decentralized finance (DeFi) scenarios, users can provide liquidity or participate in certain platform activities to earn secondary tokens. This process, termed 'farming', incentivizes users to interact and contribute to a platform.