☝️ Coin burning is when a specific amount of cryptocurrency or tokens is intentionally taken out of circulation by sending them to a special address where they cannot be accessed or used again.
👋 Connection to the real world?
Think of coin burning like a company buying back its own shares. This process boosts earnings per share by reducing the number of available shares in the market. It's similar to how central banks take physical currency out of circulation to control the availability and purchasing power of a national currency.
👨💻 How coin burning works?
Coins are sent to a burning address, and since no one has access to it, they can't be retrieved or used. The blockchain records every transaction, providing proof that the coins were sent to the burning address and effectively removed from circulation.
🫣 How projects burn coins?
Projects outline this in their tokenomics. Coin burning can happen once, in stages, or on a schedule. Developers can manually burn coins, or smart contracts can do it automatically. Some projects set aside coins for burning, while others buy coins from the market and send them to the burning address. Some also burn a portion of the transaction fees they receive.
🧐 What is Proof-of-Burn?
Proof-of-Burn is a blockchain consensus mechanism, similar to Proof-of-Stake, where coins secure the network. Instead of staking, holders burn a certain amount of coins. Ripple and Factom stand out among blockchains using this method.
😬 Why coin burning is necessary?
Coin burning creates scarcity, raising the value of the remaining coins. It helps control inflation, builds investor trust, and ensures protocol compliance.
Examples:
- Shiba Inu reduces total supply and increases value through coin burning.
- Binance burns a portion of BNB coins every quarter.
- Ethereum, Ripple, TRON, and VeChain also burn coins for various reasons.
✌️ Limitations of the coin burning process
Coin burning doesn't always immediately increase prices and can be seen as manipulation, raising regulatory concerns.
👉 Consideration Before Investing:
Before investing in a cryptocurrency that employs coin burning, it's essential for investors to understand the project's tokenomics, the purpose of coin burning, and how it aligns with the project's long-term goals. This can help investors make informed decisions based on the potential impact of coin burning on the cryptocurrency's value.
🔄 Dynamic Nature of Coin Burning:
Coin burning practices can evolve over time. Some projects may adjust their coin burning strategies based on market conditions, community feedback, or changes in their overall vision. Staying updated on a project's whitepaper and official announcements can provide insights into any modifications to their coin burning approach.
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FAQs
Cryptocurrency burning is the act of sending tokens to a wallet that cannot be accessed. Usually, the holder's wallet can generate a burner address to which they send tokens. This creates new private keys that belong to the burner wallet—no one has these keys, so the coins become inaccessible.
What happens when a crypto coin is burned? ›
Burning crypto refers to a deflationary process that permanently removes cryptocurrency tokens from circulation. This is done to decrease the total supply of a digital asset as an attempt to boost demand and increase market value.
Does coin burning increase price? ›
Most of the time, it's the developers of a cryptocurrency who decide to burn a certain amount. Coin burning reduces the supply, making tokens of that cryptocurrency scarcer. That scarcity can lead to an increase in price and benefit investors.
Can burned crypto be recovered? ›
“Burning” crypto means permanently removing a number of tokens from circulation. Crypto burning is typically done by transferring the tokens in question to a burn address, i.e. a wallet from which they cannot ever be retrieved.
Is burning crypto a good thing? ›
While there is no guarantee that burning coins will increase the price of a cryptocurrency, it can be a useful tool to help maintain value and incentivize investors. If you choose to invest in a cryptocurrency, check its burning strategy to see if it fits your goals.
Which crypto coins are burning? ›
Binance burns a portion of BNB coins every quarter. Ethereum, Ripple, TRON, and VeChain also burn coins for various reasons.
What are the benefits of burning tokens? ›
The primary purpose of a token burn is to alter the balance of supply and demand. As tokens are removed from the supply, creating more scarcity, the value of the remaining tokens should theoretically rise.
Which coin has highest burn rate? ›
In recent news, meme coin Shiba Inu attracted attention with a significant increase in burn rate, rising over 5500%. According to Shibburn, approximately 26 million SHIB tokens were removed from circulation yesterday.
Will shiba inu coin reach $1? ›
Assuming a constant market cap, around 589.25 trillion tokens would have to be burned to justify a price per token of $1, yet just 3.4 million tokens have been burned in the past 24 hours (as of this writing). At that pace, it would take 484,834 years to reach the target.
Is Shiba Inu burning coins? ›
Since the launch of Shibarium, the team has incinerated up to 43 SHIB coins in five different burns. Further, the Shiba Inu official X account disclosed that the team had burnt SHIB coins worth almost 200 ETH. The fifth burn on January 9 wiped off about 9.35 billion SHIB tokens from circulation.
To burn the coins, miners send them to a burner address. This process does not consume many resources—other than the energy used to mine the coins before burning them. Depending upon the implementation, you're allowed to burn the native currency or the currency of an alternate chain, such as Bitcoin.
Can I get money back I lost in crypto? ›
Reporting a cryptocurrency scam can also help you recoup your losses. The sooner you report it, the better the chances of authorities being able to track down the scammers and recover any stolen funds. In some cases, reporting a scam can also lead to compensation or reimbursem*nt for victims.
Does Ethereum burn coins? ›
Ethereum utilizes ETH-burning mechanisms, including EIP-1559's base fee burning and project-specific buyback-and-burn. Several mechanisms within the Ethereum ecosystem facilitate the burning of ETH. One of the most significant is the base fee burning introduced by EIP-1559.
What is the burn strategy in crypto? ›
The concept of a crypto coin burn is similar to a stock buyback in traditional finance, where a company buys back shares to reduce the total number of shares available on the market. Similarly, a crypto coin burn aims to decrease the total supply of a cryptocurrency, with the aim to potentially increase its value.
How much is Jesus' coin? ›
Jesus Coin's price today is US$0.00000006869, with a 24-hour trading volume of $495,191. JESUS is -4.87% in the last 24 hours. It is currently -28.98% from its 7-day all-time high of $0.00000009672, and 14.52% from its 7-day all-time low of $0.00000005998. JESUS has a circulating supply of 151,426.49 B JESUS.
What crypto to buy now? ›
Here are the top crypto coins we recommend as the best crypto to buy now: PlayDoge ($PLAY), Sealana ($SEAL), WienerAI ($WAI), Binance Coin (BNB), XRP (XRP), and Solana (SOL).
How many Shiba Inu coins were burned? ›
Because of this, Shiba Inu has destroyed or gotten rid of 410 Trillion Shiba Inu tokens in the last three years. Shiba Inu was launched four years ago with 1 Quadrillion in total supply value.
What does it mean when liquidity is burned in crypto? ›
The term “LP burn” in the crypto world refers to the process of burning tokens by a liquidity protocol (LP) to reduce the supply of those tokens. This can be done to control inflation, increase the value of the token, or maintain liquidity balance.
Will Shiba Inu coin reach $1? ›
Assuming a constant market cap, around 589.25 trillion tokens would have to be burned to justify a price per token of $1, yet just 3.4 million tokens have been burned in the past 24 hours (as of this writing). At that pace, it would take 484,834 years to reach the target.
