Token Burn
Also known as: Burn, Burning, Coin Burn
The permanent removal of tokens from circulation by sending them to an inaccessible wallet address, reducing total supply.
Token burning is the process of permanently removing cryptocurrency tokens from circulation by sending them to a "burn address", a wallet with no known private key that can never be accessed. This reduces the total supply of tokens, potentially increasing scarcity.
How Burns Work:
- Tokens sent to a burn address (e.g., 0x000...dead)
- Address has no private key, tokens are irretrievable
- Burned tokens visible on blockchain but unusable
- Total circulating supply decreases
Types of Burns:
Scheduled Burns: - Pre-programmed in tokenomics - Occur at regular intervals - Example: BNB quarterly burns
Transaction Burns: - Percentage of each transaction burned - Creates continuous deflation - Example: Ethereum EIP-1559 (base fee burned)
Buyback & Burn: - Protocol uses revenue to buy tokens - Purchased tokens are burned - Links token value to protocol success - Example: Various exchange tokens
One-Time Burns: - Project burns unsold tokens after sale - Emergency burns to reduce supply - Community-voted burns
Economic Effects:
| Effect | Impact |
|---|---|
| Reduced Supply | Potentially higher price per token |
| Deflationary Pressure | Counters inflation from rewards |
| Signal Confidence | Shows long-term commitment |
Notable Burns: - Ethereum burns ~2-5 ETH per minute (post-EIP-1559) - SHIB burned 410T tokens (41% of supply) - BNB targets 100M burned (50% reduction)
Considerations: - Burns don't guarantee price increase - Must be balanced with utility and adoption - Excessive burning can harm ecosystem growth
Related Terms
Related Crypto Analysis
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