Token burning is the process of permanently removing specific number of tokens from circulation to reduce the total supply. This is typically done by sending tokens to a unique "burn address" — a wallet that no one can access — making the tokens unrecoverable and unusable to sent to other addresses.
🔥 How Token Burning Works
1. Tokens are sent to a "burn address" (e.g., 0x000...000dead).
2. The transaction is recorded on the blockchain.
3. Total circulation supply is reduced accordingly.
🎯 Why Is Token Burning Done?
1. Control Inflation
Reducing supply can counteract inflation, especially in tokens with high issuance rates.
2. Increase Scarcity
Fewer tokens = potentially more value per token (basic supply and demand economics).
Similar to a company buying back and retiring its stock.
3. Boost Investor Confidence
Demonstrates commitment to long-term value.
Shows the project is not flooding the market with tokens.
4. Transaction Fee Burning
Some blockchains (e.g., Ethereum's EIP-1559) burn a portion of transaction fees.
Makes the network deflationary over time.
5. Deflationary Token Models
Some projects build burning into the tokenomics — e.g., Shiba Inu, BNB, or SafeMoon.
6. Governance Decisions
DAOs may vote to burn unsold tokens or reduce supply to change incentives.
⚠️ Considerations
Not always effective: Burned tokens ≠ guaranteed price increase.
Requires transparency: Burns must be verifiable on-chain.
Can be manipulative: Some projects use burns for hype without real impact.
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