#DeFiGetsGraded

Token Burn is a permanent removal process of a certain number of tokens from circulation, aimed at reducing supply and increasing the value of the remaining tokens (theoretically). This process is similar to "destroying" tokens, and they cannot be recovered after burning.

Here’s a simple explanation of how burning works:

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🔥 How are tokens burned?

1. Sending tokens to an unusable address

Tokens are sent to an address known as a "burn address."

No one possesses the private key to this address, making the tokens sent to it irretrievable.

An example of a common burn address in Ethereum:

0x000000000000000000000000000000000000dEaD

2. Updating the smart contract

Some projects program a function in the smart contract that reduces the total supply upon burning.

This function can be:

Automatic (executed with every transaction)

or manual (executed by the management at a specific time)