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Author: Admin | 2025-04-28
Token burning is a mechanism implemented by crypto projects or holders aimed to eliminate tokens from the supply forever. Large numbers of circulating tokens are a common concern for investors who question the sustainability of a token's future value. As a solution to this concern, crypto projects execute coin burning at once or at regular intervals according to their burning goal. For example, popular memecoin Shiba Inu (SHIB) has increased its token burn to over 863% in June 2024. According to Shibburn, the total SHIB burn tokens from its initial supply has crossed 410 trillion. In this article, we'll understand token burning, its working process, its importance, advantages, disadvantages, impact on token price, and major examples from the crypto space. What is Token Burning?Token burning is a method that involves the permanent removal of tokens or coins from circulation by sending them to an irretrievable address, thereby reducing the total supply.In most cases, the primary intention of burning crypto is to make it scarce and valuable, benefiting its investors and community.In the process of burning, tokens are intentionally transferred to an eater or burn wallet address without any access. Once the tokens are sent to these inoperable wallets, it's impossible to recover them.Say you want to burn ETH. All you’d have to do is send any amount of ETH you want to burn to the Ethereum burn address.Ethereum burn address: 0x0000000000000000000000000000000000000000The popularity of crypto burning started in 2017 following the token burn initiative of Binance Coin (BNB). In 2018, tokens like Stellar (XLM), Bitcoin Cash (BCH), and Tron (TRX) also embraced crypto burning. How Does Coin Burning Work?Step 1A token holder who aims to participate in the burning process will initiate the process by calling the "burn function." Here, the holder also mentions the amount of coins intended to burn.Step 2The token's smart contract then verifies whether the person holds enough tokens on their provided wallet address. Here, the smart contract also ensures that the holder has been given a valid number of tokens.Step 3If the token available on the wallet address is below the provided number or is a non-positive number, it's considered invalid, and the burn function will not be initiated. Values such as 0, -2. -0.5, etc., are considered invalid.Step 4If the holder has enough tokens and the provided number is valid, the burn function gets initiated. After the execution of this function, the provided number of tokens gets deducted from the token holder's wallet address. Once this crypto burning is completed, the tokens are gone forever, leaving no possibility for recovery.Why is Burning Tokens Important?Although the goal of token burning is to reduce the number of coins, crypto projects execute this process for various purposes, such
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