Steemit Crypto Academy Contest / S5W4 - Token Burn
TOKEN BURN
Crypto token burning process is done to achieve many benefits. When the community of any cryptocurrency commits to the improvement of that particular crypto, it burns a certain amount of that cryptocurrency from their circulation supply, which we call token burn. These tokens permanently die from circulation and are transferred to a dead wallet.
Doing this process is likely to increase the value of the token and also brings many other benefits like stability of the coin, long-term commitment etc. There are many blockchains that burn their tokens so that their value remains stable and people trust them. Binance (BNB) token is a good example of this.
We have also read that if the supply of a thing like crypto or any other thing decreases, its price automatically increases. So the same thing happens with cryptocurrencies that when their supply decreases, their value increases. Let us learn with an example.
Suppose there is only one oil shop in a city and there are no oil shops in the whole city. So it is obvious that the whole city will go to that shop to buy oil, which will increase the price of oil because the supply of the oil will be limited. On the other hand, if there are 10 oil shops in the city, then the supply for oil will be more, due to which its price will also be lower.
So the same thing happens in cryptocurrency that if the supply for a coin is high then its value will be low and if the supply for a coin is low then its value will also be high. A token burn is therefore performed to for decrease its demand by burning some amount of token of a crypto, which is likely to increase its price.
WORKING
We all know that in crypto currency when we want to buy and give crypto from anyone, we send them through wallet and we also have private keys through which we do transactions with each other.
That's why the blockchain creates a wallet for burning tokens, which we can also call a dead wallet, and in which we can only send tokens, but those tokens cannot return from there, which means that those tokens are dead forever.
The private key of this wallet is unknown. So the way it works is whenever a cryptocurrency is to be burned, that particular cryptocurrency is sent to the dead wallet and from there it never comes back and it is burned.
BENEFITS OF TOKEN BURNING
There are many benefits of burning tokens, let's go through them one by one.
- STABILITY
Many stablecoins in the crypto market, such as USDT, burn an amount of their coin to keep themselves pegged to a fiat currency such as the US dollar. Because of burning, their value remains stable and their value remains pegged to fiat currency and this is also a major advantage of burning coins.
- INCREASE IN PRICE
Guys, the first benefit that comes from burning cryptocurrency coins is that the value of that cryptocurrency can increases. As I mentioned above, if the supply of a crypto decreases, then its value increases.
- INVESTORS ATTRACTION
Another advantage of coin burning is that it makes the crypto project stronger, seeing that many new investors come and invest in the project. Whenever a new investor invests in crypto, many others are also affected.
- FOR PORMOTION
After the token burn, the cryptocoins team's shares on their social media accounts that they have burned their xyz tokens which affects many people. In this way they also increases their coin promotion and many people see this and join their community.
BLOCKCHAINS TOKEN BURNING
Blockchains burn their tokens to achieve the benefits I've mentioned above. Every blockchain aims to outperform other blockchains and make a name for itself in the world so that people invest more and more on that project.
Many blockchains burn their tokens to increase the value of certain crypto token. So that people can benefit from them. Also, their aim is to attract more people so that they trust more on that blockchain.
Blockchains burn their tokens for its betterment and burning also reduce the supply of these tokens from circulation. So these are some of the reasons why blockchains burn their tokens.
A BLOCKCHAIN THAT BURNED ITS TOKENS
Binance blockchain is a blockchain that has been burning its own crypto tokens (BNB) form years and has even started a quarterly burn system. Since 2017, the Binance Blockchain has burned millions of its tokens from its circulation and the amount of tokens burned now stands at 38,683,447.66 (BNB).
This is the reason why it doesn't go down that much and remains fairly stable even in a bearish market. This blockchain burned its last token on October 2022 and let me tell you the result. They burned a total of 2,065,152.42 BNB tokens from circulation.
In the screenshot above we can see how the price of the BNB coin increased after the burning and how much profit people made. This blockchain has burned many BNB tokens from its supply and is one of the most successful blockchains in the crypto world due to its burning mechanism.
BURNSTEEM25
Burnsteem means we burn our steem tokens and 25 percent means we set 25 percent of our post payout to @null account. This means that 25% of the hundred percent of our post payout will go to @null account and that 25% steem will burn. The @null account is the dead wallet of steem blockchain.
As I mentioned above every blockchain creates a dead wallet where we can only send tokens but not receive anything from it. So 25% steem tokens automatically burns when our post payout if we sets 25% beneficiary to @null account and those steem disappears from the circulation.
Now let's talk about its benefits. Yes, I totally agree that if we set 25% of our post payment to @null account then the value of steem will increase in the medium term. Because I have mentioned above that burning tokens has a lot of advantages if the supply of a coin decreases then its price can increases. This is a great step and it can skyrocket the value of steem. Because most blockchains burn their coins to appreciate the value of their tokens.
https://steemit.com/hive-172186/@malikusman1/achievement-1-by-introduction-malikusman1
WRITER:
Hello friend,
Wow I am really new to this friend, although I am new to it, it sounds so true because I know burn token affect the movement and growth of the Blockchain. No wonder USDT has been so successful of a long period of time and you rarely see the USDT leave this peg it has with USD.
Thank you very much for sharing, please you can check my own entry here
wishing you success
Glad to know you learn something new from me, yes stable coins are also burned to sustain them. Thank you for the comment.
Peace, Greeting.
my brother man, I am impressed with your findings.
The sole aim of burning tokens is based on the simple law of demand and supply in Economics101, which states that reducing the supply, would ultimately lead to an increase in demand which in turn leads to an increase in price.
And the act of Token burning is thus to reduce the supply of this token, there increasing the demand, which in turn is expected to increase the price. It is a way similar to what Bitcoin halving is all about to reduce its inflation rate, thus increasing its price.
Good luck my friend, do have a wonderful day.
Yes, I agree with you that burning tokens based on demand and supply law. When the supply of a token decreases, its price can increases. Thank you for the important comment.
Assalamualaikum Usman brother,
You have done a very nice job in explaining the Token Burn as always. Your presentation of the whole burning process is really appreciable. You have a good knowledge of the topic.
There are lot of advantages of the burning of tokens and this is one of them. The more will be the burning, the more will be the reduction in supply and directly, the more will be the price of that token.
The good price movement of a token in the market leads to the great attraction for more and more investors in the platform. And this thing is beneficial both for the users and the blockchain.
Thanks a lot for sharing your precious post with us. I wish you a very good luck for the contest.
Thank you brother for the appriciation.
Token burn is something special in the crypto space that is aimed at limiting the supply of cryptocurrency so that excess of them don't exist in circulation. The burning does not automatically improve the value but it creates supply-demand balance that makes the asset scarce and more demand which then improve its market price.
It is true that the burning of these tokens also attract more investors and not that only, it also incentivize existing investors granting them more yield on their investments.
Yes friend, you are write that burning of tokens makes supply-demand balance. In this way the price can be increases. Thank you for visiting my post.
Greetings @temitopef