What is the reason for creators to destroy their own creations - why do founders burn their projects’ coins? 🔥 As always, we are here to give you an answer to that question 😉.
Disclaimer: If you are allergic to the word “coin”, might consider skipping this article, because the amount of that word in it is very high 😁.
Why?
To increase the liquidity and hold the coin’s price, projects have to burn some, so inflation doesn’t happen. This might happen when the coin is already being used or right after the ICO, when there are some left.
This differs from one project to another, but the main reason is the same for everyone - no one wants to lose their money and the developers are in charge of helping their project’s users keep their coins in demand 💎.
Some developers might also buy the “burned” coins with their own money, showing their confidence in project’s success and once again increasing the overall liquidity 🆙. This could be compared to a share buyback, when a company buys some of its own shares to improve their stability on the market.
What does burning coins actually mean, is there like a crypto-fireplace?
No, burning some coins means locking them, so none can be used in the net 🔒. There are multiple ways of doing that.
Comission burning
In most nets, the transaction fees are given to miners, but there are exceptions, when part of the fee is being sent to a private wallet, that locks the assets forever ♾.
Algorithm
Some nets use a special PoB (Proof-of-Burn) consensus, that makes miners send some amount of coins to a private wallet for proving that the operation was executed successfully ✅.
Wallet burning
The simplest way of burning coins is just sending them to a wallet that no one has access to. Projects will usually provide all the information about such wallets and the operations engaging them 📑.
Hardfork
The most rare and expensive way of burning coins is doing that during a hardfork🍴, while also changing the whole ecosystem and the inner algorithms. When the reworked net is introduced, the amount of tokens used inside the net can also be changed burning, all the ones, breaking the limits.
That might all sound as a useless gimmick, but Ethereum, Binance Coin, Tron and Ripple are successfully burning coins already. So, don’t think that burning coins is stupid - it is a necessity‼️
Stay tuned! 📻
