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The crypto world is full of jargon and acronyms, and sometimes it can be tough to keep up. In this post, we’ll explain what “burn” means in the context of cryptocurrency.
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Introduction
“Burning” or “burning coins” is a way of destroying cryptocurrency to reduce the circulating supply. By sending cryptocurrency to an unspendable address, the coins are effectively removed from circulation, similar to how a company might buy back its own stock.
The purpose of burning coins is twofold. First, it can be used as a way to distribute new currency. For example, a company might allocate a certain number of coins to be burned every year as part of its annual bonus program. Second, it can be used as a way to reduce the supply of a currency in order to increase its price.
Coin burns are not without controversy. Some argue that they are nothing more than publicity stunts designed to generate hype and pump up prices. Others argue that they are an effective way to reduce inflation and distribute new currency in a fair and decentralized way.
Regardless of your opinion on coin burns, they are becoming increasingly common in the cryptocurrency world. Here are some examples of recent burns:
In January 2018, Binance burned 1 million BNB (its native currency) as part of its quarterly coin burn program. This represented about 5% of the total supply of BNB at the time.
In February 2018, Stellar Lumens (XLM) burned 55 billion XLM (about 25% of the total supply) as part of its plan to mitigate inflation. The remaining XLM was distributed between different stakeholders, including Stellar’s partners and employees.
In April 2018, TRON (TRX) burned 1 billion TRX (about 10% of the total supply) as part of its plan to reduce the circulating supply and increase the price per TRX.
What is “Burning” in the Crypto World?
In the crypto world, “burn” refers to the process of sending cryptocurrency to a public address that is unspendable. This is usually done to reduce the circulating supply of a coin, which in turn can increase the value of the remaining coins. Let’s take a closer look at how this works.
What is a “Burn Address”?
A burn address is a public key that has been mathematically destroyed to prevent the private key from being revealed. By doing this, it becomes impossible to spend the coins associated with that address.
Burning is often used as a method of destroying tokens that are no longer needed or wanted. For example, a company may choose to burn all of its unsold tokens to increase the value of the remaining tokens.
Burning can also be used as a way to reduce the supply of a token, which can lead to an increase in its price. For example, if a company burns half of its tokens, the remaining tokens will be twice as valuable.
There are a few different ways to burn a token. The most common method is to send the tokens to an address that is not controlled by anyone. This could be an address that was generated randomly or an address that was created specifically for burning tokens (often called a burn address).
Another method is to destroy the private keys associated with the tokens. This can be done by physically destroying the hardware on which the keys are stored or by using software to delete the keys permanently.
Burning is a common practice in the cryptocurrency world and is often used as a way to increase the value of a token.
What is a “Burn Transaction”?
A burn transaction is a sending of cryptocurrency to an inaccessible address, rendering the coins irretrievable and permanently removing them from circulation. The purpose of a burn is to decrease the supply of a currency, effectively making each unit more scarce and more valuable.
A typical burn transaction would involve sending crypto to a public key that was generated offline and has never been used. Because the private key needed to access the coins is not known, the coins can never be spent and are effectively removed from circulation.
The process of burning coins can also be used to destroy unwanted or unsold tokens, as was the case with Binance’s decision to “burn” 1 billion unsold BNB tokens. By destroying these tokens, Binance ensured that only those that were actually sold on the open market would remain in circulation, thus increasing their value.
What is a “Coin Burn”?
A coin burn is when a cryptocurrency company “burns” coins, or takes them out of circulation. This is usually done to decrease the supply of the coin, which in theory should increase the value of the remaining coins in circulation. Sometimes it’s done as a way to signal confidence in the long-term future of the coin.
In most cases, the burned coins are permanently taken out of circulation and can no longer be used or traded. However, some companies will destroy a portion of their coins and then release the rest back into circulation.
Coin burns can be done in a number of ways, but the most common method is for the company to send the coins to a public address that can’t be spent from. This could be an address with a incorrect number of characters, an address that’s already been used, or an address that’s specifically designed to be unspendable.
Whilecoin burns are often advertised as a way to increasethe valueof a cryptocurrency, it’s important to do your own research before investing. The coin could go up in value after the burn, but it could also go down. And even if the price does go up, there’s no guarantee it will stay there.
The Purpose of “Burning” in the Crypto World
The process of “burning” in the crypto world is when a certain amount of crypto tokens are taken out of circulation. This is usually done by the crypto project team destroying the private keys associated with the tokens. The purpose of burning is to try and increase the value of the remaining tokens in circulation.
To Decrease the Circulating Supply of a Coin or Token
When a cryptocurrency is “burned,” it generally means that a certain amount of the coin or token has been permanently removed from circulation. This is done with the intention of decreasing the circulating supply of the currency, which in turn should theoretically increase the value of each remaining coin or token.
There are a few different ways that burning can be carried out. The most common method is for the development team to send the coins or tokens to an address that can never be used again. This address is often referred to as a “burn address.” Another method is to destroy the private keys associated with the coins or tokens. Once the private keys have been destroyed, there is no way to access those funds ever again.
It’s important to note that simply removing coins or tokens from circulation does not guarantee that the value of the currency will go up. There are many other factors that affect price, including supply and demand, news, and overall market conditions. However, decreasing the supply can be a helpful tool in supporting a long-term price increase.
To Destroy Unsold or Unused Coins or Tokens
In the crypto world, “burning” refers to the process of destroying unsold or unused coins or tokens to increase the value of the remaining coins in circulation. The burned coins are permanently removed from circulation, making them unavailable for trading or spending.
The idea behind burning is that it will reduce the supply of coins or tokens, making the remaining ones more valuable. In turn, this should lead to an increase in the price of the coin or token.
Burning is a way to control the supply of a cryptocurrency and can be used as a strategy to increase its value. For example, a company might burn all unsold tokens at the end of an ICO (initial coin offering) to create scarcity and increase demand for the remaining tokens.
Another common use case for burning is to destroy tokens that have been used to pay fees on a blockchain. For example, when a transaction is made on the Binance exchange, a small fee is charged (0.1% of the total transaction value). These fees are then “burned” – permanently removed from circulation – which reduces the supply of Binance Coins (BNB), Binance’s native cryptocurrency.
The process of burning can be automated using smart contracts. These are self-executing contracts that can automatically destroy coins or tokens when certain conditions are met. For example, a smart contract could be set up to automatically burn all unsold tokens at the end of an ICO.
Burning is a relatively new concept in cryptocurrencies and is still evolving. It remains to be seen how effective it will be as a long-term strategy for increasing the value of digital assets.
To Show a Long-Term Commitment to a Project
“Burning” is a term often used in the crypto world to show a long-term commitment to a project. When a crypto currency is “burned”, it means that it has been permanently removed from circulation and can no longer be used. This is usually done by sending the coins to an address that can never be used again, or by destroying the private keys associated with them.
Burning can have different effects on the price of a currency, depending on the circumstances. For example, if a currency is burned in order to reduce its supply, this could cause the price to go up if demand remains the same. On the other hand, if a currency is burned as part of a marketing campaign (for example, to promote a new project), this could create hype and lead to an increase in price.
In any case, “burning” is seen as a positive sign by many in the crypto community, as it shows that the team behind a project is committed to its long-term success.
“Burning” Examples in the Crypto World
In the crypto world, “burning” typically refers to the process of sending cryptocurrencies to a public address that is not intended to ever be spent from. The most common reason for “burning” cryptocurrencies is to reduce the circulating supply, which in turn can lead to an increase in the price per token.
Binance Coin (BNB)
Binance Coin (BNB) was created by Binance, one of the largest cryptocurrency exchanges in the world. The Binance exchange is a transaction fee-free exchange that uses its own native coin, BNB.
The total supply of BNB is limited to 200 million and every quarter, Binance “burns” a portion of their fees collected from users in order to reduce the circulating supply and increase the value of remaining coins. This process is known as “coin burning” and it’s a way to artificially increase the scarcity of a cryptocurrency and drive up its price.
At the time of writing, Binance has burned over 18 million BNB, which is equivalent to nearly $200 million USD.
The native token of Kucoin, KCS is an ERC20 token that offers a few perks to holders. For example, KCS holders receive a percentage of Kucoin’s daily trading fees as a reward.
In order to reduce the total supply of KCS, Kucoin plans to “burn” tokens on a quarterly basis. This is done by sending tokens from Kucoin’s treasury to an unspendable address, permanently removing them from circulation.
Each quarter,Kucoin will take out 10% of their net profits and use part of it to buy back and burn KCS. One million tokens were burned in the first quarter of 2018.
Pundi X (NPXS)
Pundi X is a crypto project that “burns” tokens as a way to reduce the circulating supply, and in turn, increase the value of the remaining tokens.
Each quarter, Pundi X buys back a certain amount of NPXS from exchanges and “burns” them, meaning they are destroyed and removed from circulation. The company has burned over $4 billion worth of NPXS so far.
The idea is that by reducing the supply of NPXS, each token becomes more valuable. This Ultimately benefits holders of the token as the price per coin should theoretically go up.
Conclusion
In conclusion, “burn” in the crypto world refers to the destruction of coins or tokens in order to decrease the supply and increase the value of the remaining coins or tokens. This can be done by a variety of methods, but the most common is to send the coins or tokens to a wallet that can never be accessed again.
