We often hear the term
Cryptocurrency burning
- What is it?
- How is it done?
- What is the benefit of burning?
Coin burning is the process of permanently and intentionally deleting a currency to reduce its supply.
- Here's how this burning is done:
This is done by sending the coins to an address whose keys no one has, so that the coins cannot be accessed in any way. Once the coins are transferred to this address, the development team actually deletes the coins from the display because they have become inaccessible coins.
Anyone in the community can burn their coins by sending them to the burn address. In addition, project developers can create pre-programmed smart contracts with certain criteria that determine how much of the digital currency will be bought back from the circulating supply in the market to burn it. Typically, the burning process is primarily carried out by project developers and not by the community.
- What is the benefit of burning?
Coins are burned to control the circulating supply of the currency because there is no good reason for the digital community to burn their coins as no one wants to lose their money.
For example:
The London fork on the Ethereum blockchain brought a mechanism for burning gas fees used on the network. Basically, the base fees paid for transactions on the Ethereum blockchain are automatically sent to the burn address.
Another example is the Solana coin that also burns network fees, and of course you heard about burning huge amounts of the BONK coin the day before yesterday. 987 billion BONK coins were burned, which is equivalent to 50 million dollars. In the end, the burning process helps raise the value of the coin, thus investors are excited to hold the coin in the long term, which in turn helps developers get long-term support to build their project.
