Content
Project developers can mislead their community by claiming to burn coins. While in reality, the coins are what does burn mean in crypto \ sent to a wallet that they control. Once the price increases, the developers could sell off their coins and walk away with a hefty profit, leaving remaining stakeholders with worthless tokens.
To Maintain the Token’s Steady Price
During the launch of BNB https://www.xcritical.com/ in 2017, Binance committed to removing 100 million coins from its total supply of 200 million BNB. Binance’s whitepaper also clearly mentions using 20% of their quarterly profit to buy back BNB and burn them until their commitment towards destroying 100 million BNB tokens is fulfilled. A token holder who aims to participate in the burning process will initiate the process by calling the “burn function.” Here, the holder also mentions the amount of coins intended to burn. “Some blockchains even have a built-in mechanism integrated into the protocol that burns the tokens when necessary,” Cerba said. Functionally speaking, this allows projects and individuals to have verifiable proof recorded on the blockchain that the tokens sent to the address have disappeared from circulation.
Vitalik Buterin’s SHIB Token Burn
The token’s smart contract then verifies whether the person holds enough tokens on their provided wallet address. Here, the smart contract also ensures that the holder has been given a valid number of tokens. For example, popular memecoin Shiba Inu (SHIB) has increased its token burn to over 863% in June 2024. According to Shibburn, the total SHIB burn tokens from its initial supply has crossed 410 trillion.
Which of these is most important for your financial advisor to have?
This type of burn adds an element of predictability and automation to the token supply management. Some algorithmic stablecoins use burning as a method of keeping the asset pegged at a certain price. The mechanic works by burning tokens when the asset’s price is low to reduce supply and better match demand.
Curated Extinction: Token Burning for Art
In practice, the deflationary tactic has produced other favorable outcomes. The value of a digital asset fluctuates and is highly subjective, Geronimo said — especially within a volatile crypto market. It operates in likeness to a stock buyback, where companies repurchase their own shares, effectively canceling them out. Burning crypto is a deflationary mechanism that keeps the market value of digital currencies in check.