token burn
Token burning is a process where cryptocurrency tokens are sent to a wallet without private keys, effectively removing them from circulation. This is done to control the supply of the token and increase its value. The process is often described as "destroying" tokens, but they are not actually destroyed, as they can never be retrieved from the wallet. Token burning is typically done by transferring tokens to a burn address, which is a wallet address that cannot be accessed or assigned to anyone. The tokens sent to this address are lost forever, and the supply of the token is reduced, potentially leading to an increase in its price. Token burning is often used as a deflationary mechanism to increase the value of remaining tokens, as assets tend to rise in price when the circulating supply falls. It can also be used to incentivize token holders, maintain the price peg of stablecoins, correct mistakes, and as a consensus mechanism.
what are some examples of cryptocurrencies that use token burning
1. Binance Coin (BNB): Binance, a cryptocurrency exchange, burns BNB tokens every quarter to maintain a high, stable price.
2. Stellar (XLM): The Stellar Development Foundation burned over half of the Stellar supply (55 billion XLM tokens) in 2019.
3. Shiba Inu (SHIB): The developers of Shiba Inu gave half the supply to Vitalik Buterin, who promptly burned 90% of those tokens in 2021.
4. Ethereum: While not a token burn in the traditional sense, Ethereum's transition from Proof of Work (PoW) to Proof of Stake (PoS) involved a token burn, as ETH held by users before the transition was converted to ETH2 and the original ETH was destroyed.
5. Sweat Economy: This project uses a governance vote to allow investors and token holders to vote on burning tokens.
These are just a few examples, and there are many other cryptocurrencies that use token burning as a mechanism to control supply, increase value, or maintain the price peg of stablecoins.