After having suffered a catastrophic crash earlier this month, Terra has been desperately attempting to return their token to their initial value, by burning a massive reported 85% of their tokens. Another cryptocurrency which utilises burning, which has been covered across a wide range of media for doing so in recent days, is Terra . The token, which is currently in presale, intends to implement a burning mechanism into their economy, taking on a deflationary model of finance. Logarithmic Finance and Terra are both tokens that participate in burning, however, their reasons are very different. The constant burning keeps a steady value of the token and also bets for along term price rise .

How Do You Burn Cryptocurrency Tokens

With the rise of decentralized finance protocols, coin burning has become more common. That’s when the company that issued the stock buys back a number of shares and reduces the total number of shares on the market. All encrypted asset exchange strategies are the sole responsibility of the user. You should not initiate exchanges if you do not understand the risks surrounding the nature of these transactions. You should know that there are several wallets for storing your Bitcoins and other crypto assets, but do you know…

All cryptocurrencies can be sent to a burn address, which means it’s possible to burn cryptocurrency with any of them. Developers also burn tokens as a way to hide whales who hold large portions of a cryptocurrency. Let’s say a developer launches a cryptocurrency with 1 billion tokens, keeps 100 million, and immediately burns 600 million. It will look like the developer owns 10% of the supply because the original supply was 1 billion. But the developer really owns 25% of the 400 million tokens still in circulation, which is obviously a much larger amount. The metrics of CHSB including the token burning can be seen on theCHSB overview page , where all the transactions under the mechanism for protection appear.

Common Law Admission Test May Not Select Students With Right Ethos: CJI Chandrachud

To shed more light on this practice, consider a burn as a transfer of money to a recipient who can never come into possession of that money. The burn transaction will be recorded on the blockchain as any other transaction and these tokens are forever unusable. For instance, the reduction in the overall circulation of a crypto coin can trigger scarcity and boost its value. So, if you’re wondering whether coin burn increases the the price of a cryptocurrency, the answer would be ‘Yes’ in most cases.

How Do You Burn Cryptocurrency Tokens

The PoB mechanism helps to prevent fraud and allows only valid transactions to pass through. Miners can burn cryptocurrency or tokens to mine new transaction blocks. Additionally, it is also possible to verify that a specific number of tokens have been burnt. The most common method to burn cryptocurrency is sending such coins to the “Eater Address.” The current balance of burnt coins is publicly available. The process requires miners to burn tokens in order to participate in the mining process. The more coins burned the more blocks they can create, meaning the more rewards they can earn.

This is why the mass burning of Terra is occurring, in an attempt to return TerraUSD to its initial value. Sign up for Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Is comparable to setting cash or art on fire, although the process is a bit more complex than lighting a match. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Does Bitcoin Burn Coins?

This can be done by sending it (or whatever quantity of tokens you’re burning) to a frozen private address which, if authentic, is an address from which the coins cannot be recovered. Cryptocurrency tokens or coins are considered “burned” when they have been purposely and permanently removed from circulation. If a cryptocurrency has a high inflation rate, burning tokens can curb the increase. Cryptocurrency exchange Binance started holding quarterly burns of its Binance Coin in 2017. The exchange has committed to doing this until 50% of the total Binance Coin supply is removed from circulation.

Burning coins serves as a supply control and price stabilization technique, particularly in the case of a stablecoin. Coins are also occasionally burned to reward investors and raise the value of the coin or token. The circulating and total supply of coins and tokens decrease as they are burned.

The developers are then free to burn billions of tokens at a later date in order to raise the token’s price. Coin burning on its own doesn’t tell you whether a cryptocurrency is a good investment. By knowing how coin burning works, you can better understand the cryptocurrencies that use it.

Different Reasons for Burning Crypto

In our crypto guides, we explore bitcoin and other popular coins and tokens to help you better navigate the crypto jungle. Tokens burn is accomplished by a function called “function burn” which can be performed by anyone in crypto-space. When the conditions are met and burn initiated, it is impossible to recover the number of tokens predefined at the start of the execution of the code. In fact, the function burn, just like the function transfer is saved on the blockchain in an irreversible and completely transparent way. Crypto burn lowers the number of coins circulating in the market. As with all transactions conducted on the blockchain, all payments are irreversible meaning that once you burn coins they can never be recovered.

How Do You Burn Cryptocurrency Tokens

There are several reasons why Ethereum’s developers have started burning ETH on such a large scale. Firstly, there is an aim to reduce the rewards available to Ethereum miners, as some try to increase their rewards by taking advantage of the mining system. Secondly, ETH is being burned to stabilize Ethereum transaction fees. And, of course, burning ETH can mitigate the increase of its supply , resulting in a price hike. Project developers can mislead their community by claiming that coins are being burned while, in reality, the coins are being sent to a wallet which they control. Once the price increases, the developers could sell off their coins and walk away with a hefty profit, leaving remaining stake holders with worthless tokens.

Why Do Cryptos Burn Coins? Does Coin Burning Affect Value?

— Meanwhile burning can also be used in the art sector to play with our notions of value and fungibility, something that is driving interesting new projects. It’s a way for participants to add new blocks of transactions to a blockchain with proof-of-burn cryptos. The advantage of proof of burn is that it’s an efficient way to validate transactions and doesn’t have the energy requirements of the proof-of-work model.

Proof of Reserves is a method of using cryptographic verification to demonstrate possession of digita… Read our expert Q&A about what you should know before investing in crypto. This guide will explain everything you need to know about taxes on crypto trading and income. The Stellar Development Foundation burned more than half of the Stellar supply in 2019.

Applications for coin burning

• By contrast, Bitcoin Cash had a coin burn in 2018 that drove up the price temporarily. And Stellar held a one-time burn of 50% of its supply in November of 2019. This was with the express intent of limiting the number of coins and increasing demand. One example might be the deliberate destruction of unsold ICO tokens.

When it comes to choosing what tools will be the most effective in your forex trading journey, there are a few aspects to consider. Whether you are a brand-new trader or a seasoned veteran, some of these tools will always be handy to help you not only find the diamonds in the rough but also stay focused on your goals. The CEO of crypto exchange FTX, Sam Bankman-Fried, has come into the spotlight for bringing about the downfall of FTX and his other company Alameda Research. In November 2022, he filed for bankruptcy for both companies after a devastating collapse in the public eye. To get started, you can deposit euros and pounds via SEPA, Faster Payments and Plaid, and convert these to a cryptocurrency of your choice with Cabital. On Aug 5, 2021, Ethereum got updated under “Ethereum Improvement Protocol” EIP-1599.


Removing an asset from circulation to adjust availability and value is not a new concept. For example, central banks adjust the amount of circulating currency to adjust that currency’s purchasing power. The act of burning effectively removes tokens from the available supply, which decreases the number in circulation.

The EIP-1599 is a part of a complete overhaul of Ethereum, the completion of which is expected by early 2022. Previously, this blockchain-based network relied on the “Proof of Work” mechanism. In the event that the person does not hold the required number of coins, the function will not be executed. That’s a great question – and the answer can be found with a quick recap of the dynamics of supply and demand. A take-profit order is an act of selling cryptocurrency to secure profits.

CoinDesk journalists are not allowed to purchase stock outright in DCG. It is thought that tokens are burned to achieve similar results. Some cryptocurrency developers intentionally burn tokens to accomplish these tasks.


While it’s possible to lose coins by sending crypto to one of these wallets, this article isn’t about coins and tokens lost by mistake. It might be even more puzzling to find out it is done intentionally. This practice, known as coin or token burning, is typically conducted by coin creators or developers. They deposit the crypto they intend to burn into these specialized wallets, also known as an eater address. The motive behind burning coins or tokens is that the value of the remaining supply will increase because the total supply of the digital asset falls and becomes more scarce.

And it is another key example of how token burning can be utilised to control crypto value. The higher the demand for a given asset, generally the higher its value. So where the supply of a given coin or token is fixed there is scope to impact its value by destroying some of that supply. In short, token burning is the digital equivalent of stashing a ton of money in a safe and locking it without knowing the access code. Burning is not a new concept for Terra , and in fact, is part of the ecosystem that fuels the stablecoin.

Users are required to burn a portion of their transactions, thereby enabling the process to take place. This model reduces the chances of spam transactions flooding the network, creating more room for healthy transactions. To use Binance as an example once crypto burn meaning again; BNB is burned on a quarterly basis, therby reducing long-term demand for the coin, but making it attractive to those with long-term perspectives. Below, we’ll outline a few of the other reasons why developers might burn their cryptocurrencies.

Hola ¿Me puedes ayudar?