The burning of cryptocurrency refers to the permanent removal of coins or tokens from circulation, reducing the total supply. This is done by sending them to a **burn address** (a wallet with no known private key, making the funds irretrievable).
How Does Burning Cryptocurrency Work?
1. Burn Address:A special blockchain address (e.g., `0x000...dead`) where tokens are sent and become unusable.
2. Transaction Verification: The burn is recorded on the blockchain, making it transparent and verifiable.
3. Supply Reduction: Since the burned tokens can never be recovered, the total circulating supply decreases.
Why Do Projects Burn Cryptocurrency?
- Increase Scarcity: Reducing supply can increase demand, potentially raising the token's value (e.g., Binance’s quarterly BNB burns).
- Control Inflation: Some blockchains (like Ethereum after EIP-1559) burn a portion of transaction fees to reduce inflation.
- Tokenomics Strategy: Projects may burn unsold tokens from ICOs or rewards to maintain balance.
- Proof-of-Burn (PoB): Some networks use burning as a consensus mechanism (e.g., Slimcoin).
Examples of Burning Mechanisms
- Binance Coin (BNB): Binance burns BNB quarterly based on trading volume.
- Ethereum (ETH): A portion of gas fees is burned (EIP-1559).
- Shiba Inu (SHIB): The community burns SHIB to reduce supply.
How to Burn Crypto?
1. Manual Burns:Projects send tokens to a burn address voluntarily.
2. Automatic Burns: Smart contracts may burn tokens as part of transaction fees or rewards.
Effects of Burning
✅ Potential Price Increase (if demand stays the same with lower supply).
⚠️ Not Guaranteed (if market sentiment is negative, burning alone may not boost price).
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