The Fiery Fate of Coins: A Guide to Coin Burn

The process of completely removing the circulation of any crypto coin by reducing its supply is called coin burn. If you have been connected with cryptocurrency, you should have seen or heard developers burning millions, billions, or even trillions of their crypto tokens.

Generally, it is a trick by crypto developers to make crypto holders make long-term investments and use restricting supply to manage the price.

Key Takeaways:

• Coin burn is reducing the supply of a cryptocurrency to increase its value.
• Burning tokens attract long-term investors and decrease spam attacks.
• Burned tokens go to a wallet with no private key and won’t return to circulation.
• Coin burning benefits the crypto network by reducing devaluation and increasing trust.
• Coin burn can be initiated for consensus, spam protection, or stablecoin maintenance.

What Is Coin Burn History In Cryptocurrency?

When a developer wants to stop the circulation of their coin, they send it to an unusable wallet address. This is known as coin burn, meaning cryptocurrency. Once a currency is set on the burn, it is gone forever, and you will never see it again.

Anyone who owns a cryptocurrency can burn their tokens, but it is different from what any developer wants to do without any reason. It is a way of throwing the money away that you have put in while manufacturing your token.

Occasionally, cryptocurrency developers decide to burn a certain amount of their coin. This leads to a decrease in the supply of that specific coin, making it lack quantity.

Now the demand for coins is greater than the number of coins, which leads to a sudden rise in the price of that coin which is very beneficial for the investor.

How Will Coin Burning Be Initiated?

Although the idea of coin burning is back from the time of stock buybacks, when the company issues the stock buys and shares them at the market price, later, these stock buys are reabsorbed, reducing the number of total shares in the market.

The coin burn was officially started in the years 2017 and 2018. This year’s coin burn list includes Bitcoin cash, Binance coin, and Stellar was burned to cut their supply which gives a sudden increase in their price.

Nowadays, it has become more familiar with those recent cryptocurrencies having a massive collection of their tokens in the starting.

One of the primary reasons crypto developers are towards coin burning is because a coin started with a low price can have a sudden increase in its value artificially after getting maximum investment by people.

A coin started with a meager price having only 1 trillion tokens, can easily attract investors because of the low price. Later all of these tokens can be burned to raise the price.

Main Reasons For Coin Burning:

Any crypto coin can be burned for different reasons, but the main aim is to increase the chance of success of that typical coin. Here are some of the specific reasons for coin burning:

Coin Burning For Effective Consensus:

Some cryptocurrencies prefer to use proof-of-burn (POB) to verify the transaction. Generally, it is a transaction method for an alternative consensus mechanism.

To solve the problem of Bitcoin proof-of-work algorithms, this method was created. Although in this method, complex mining hardware is owned by miners that can consume a massive amount of energy quickly.

Remember that miners can only burn a specific portion of their coins through proof-of-burn to reach a consensus.

Coin Burn For Protection Against Spam:

Distributed Denial of Service (DDOS) is the network of spasm transactions that slows down the network. So many developers use coin burn for protection against DDoS.

In this process, many cryptocurrencies use a mechanism of burning transaction fees instead of paying the transaction fees for securing and confirming their transaction.

In this process, crypto users are asked to burn a specific amount of their transactions so they can take place. This leaves more space for healthy marketing by reducing the chance of flooding spasm transactions.

To Increase The Value Of Cryptocurrency:

The main aim of crypto burn is to increase the value of that token and attract more investors. Hence, burning a token reduces circulation, which increases scarcity and increases the price of that token.  

For Long-Term Commitment:

The coin burn is the best way to attract long-term investors because periodic and integrated coin burn is part of this coin burning protocol.

What Are The Benefits Of Coin Burning?

Coin burning is very beneficial for the crypto network and its investors. Here are a few benefits of coin burning:

• Through coin burn, a developer can increase the price of their tokens and reduce future devaluation.
• The second benefit of coin burning is making investments to trust the project development. So this leads to making investors think that the project will be successful in the future.
• The coin burn is beneficial in decreasing the chance of spam attacks.
• Token burning is also considered the consensus mechanism, which is the best way of energy consumption as proof-of-work models. This is very effective for the environment.  
• Burning the token is the best way to maintain the price of a stable coin.

Where Does Burnt Crypto Go?

There are two different wallets, known as burn address or eater address. All the public addresses are verifiable on the Blockchain, so no one has these private keys, as we all know that without private keys, no one can access crypto wallets.

Thus, there is no return if any crypto goes into the burn wallet. This means all the burned tokens will never return to circulation.

FAQs

Conclusion:

Sending tokens in the wallet with no private key is the method of coin burning. It is done to increase the value of that specific coin by decreasing its amount.

There are many more benefits of coin burning, like protection from spam. If you plan to invest in cryptocurrency, keep in mind there is not a 109% chance of an increase in the price. So be prepared for any circumstances.