TABLE OF CONTENTS
What are burn events?
“Burning” crypto means permanently removing a number of tokens from circulation. This is typically done by transferring the tokens in question to a burn address, i.e. a wallet from which they cannot ever be retrieved. This is often described as destroying tokens.
Why are tokens burnt?
A project burns its tokens to reduce the overall supply. In other words, it creates a "deflationary" event. The motivation is often to increase the value of the remaining tokens since assets tend to rise in price whenever the circulating supply falls and they become more scarce.
How does burning tokens help token holders?
Burning tokens can be similar to a company buying back its shares. The company “returns the value” to its shareholders in this way. Crypto projects burn their tokens to achieve the same goal.
Burning tokens can also benefit those staking tokens to validate transactions in a proof-of-stake protocol. When a large chunk of tokens is removed from circulation, there’s a likely chance they’ll receive a higher U.S. dollar value from their staking rewards.
Some projects have regular burning events built into their code. The aim here is to reassure potential investors that the future supply of the token will continue to shrink, calming concerns of inflation or an overly diluted market.
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