What is Coinburn?

Coin burn is the reduction in the number of coin tokens issued by a project or company somehow with the aim of increasing its scarcity in the market in order to increase the value of the coin after it is burned.

Who can burn coins? Certainly not everyone can burn a coin.

The burning of coins can only be carried out by “Founding, publishing and management team“This coin. They purposely reduce a certain amount of virtual currency circulating in the market, making it difficult for users to own more. As the number of coins released is reduced, the user mentality of being able to buy anytime will gradually shift to the thought of “hurry up” as you own because it is very little. From there, the medium will make it scarce and add value to the coin.

Of course, the amount of coins that normal users are currently holding won’t go away when the coin burn occurs.

Why burn coins like that?

Many people already know that the main objective of this measure is to help asset prices rise, but is that the main purpose of this measure?

Increase in value of tokens

The fewer tokens available on exchanges, the higher their exchange rate (according to the law of supply and demand). In fact, most cryptocurrencies or projects limit the number of coins issued. However, since the volatility of the crypto market is so great, it is very important to gradually reduce the number of tokens available so as not to burden the entire market.

Correct the mistake

Sometimes projects accidentally generate various errors that burning coins can fix. This could be an excessive amount of generated coins, the frequent generation of invalid addresses for receiving and storing coins, an unexpected increase in the number of coins due to technical errors, or the issuance of unsuitable coins suitable for public trade. The burning process is quite simple, the coins are sent to an address that does not exist or locked to a special address that cannot be withdrawn. This can ensure safe handling of such random redundancies.

Exclude unsold coins

Most projects put a limit on the number of coins they can sell during the ICO period. In some cases, an unsold amount remains on the company’s wallet. Some projects just sell the rest in the market for a good profit. However, a much better course of action is to burn any unsold coins. A project must confirm to investors that it will only use funds raised for business purposes (rejection of allegations or suspected fraud). Thus, the income from an ICO is justified by the actual demand for the token and fair to both the market and the holders.

Dividend from stocks

When the project issues a security token, the project investors become shareholders entitled to dividends. When tokens are redeemed and then burned, their cost only increases due to an artificial supply shortage, which makes it more attractive to trade. Rather than paying dividends directly to shareholders, the project can also reward them by increasing the value of their assets. When a company combines this scheme with various schemes, including an obligation to redeem a certain number of tokens at the current market price, this action becomes even more interesting for holders.

How does the coin burning work?

Basically, a token burn event takes place in the following order:

1. A coin holder calls up the burn function and confirms that it wants to burn a certain amount of coins.
2. The contract then checks that the person has coins in their wallet and that the number of tokens is valid. The number of coins must be a positive number.
3. If the person does not have enough coins or if the identification number is invalid (e.g. 0 or -5), the function for burning in coins is not carried out.
4. When they have enough, the token amount will be deducted from this wallet. The total supply of the coin is then updated and the coins are burned.

If the project implements a burning function to burn its coins, they will be destroyed forever. Burned coins cannot be restored.

Some cases of coin burn

I am going to introduce you to some typical coin burning cases.

Burn BNB

BNB is an independent virtual currency issued by Binance – the world’s leading virtual currency exchange. If you use BNB on the Binance exchange to pay the fee, the transaction fee is half cheaper than paying in any other currency. Many people are intrigued by Binance’s policy of paying fees in BNB.

What will Binance do if the amount of BNB they own increases? They will burn, even buy more from users, and burn BNB.

The last time in the fourth quarter of 2019, Binance burned more than 2.2 million BNB, which is $ 38.8 million.

TRX burning

TRX (TRON) is a blockchain-based decentralized internet protocol. TRON was developed with the aim of building a global system of free entertainment content using blockchain technology and distributed storage.

TRON was first burned on June 25, 2018. The TRON founding team took the opportunity to switch to the mainnet and decided to burn to adjust the number of votes. Because when TRON becomes scarce, they increase their attractiveness and can raise more capital from investors.

So far, TRON has been burned 9 times. Most recently, the co-founders destroyed over 99 billion ERC20 TRX and only kept around 941.5 million tokens in circulation.

Burn EOS

EOS is a blockchain platform that was developed for DApps and smart contracts and is similar in functionality to Ethereum. EOS is backed by Block.one, a company that raised $ 4 billion to help build the EOS blockchain during the ICO.

EOS recently burned an account with approximately 34 million EOS worth $ 150 million, after consulting the community.

Huobi Token Burn

Huobi, one of the first generation crypto exchanges. HT is the coin that is used in this exchange. Huobi now has more than 26 coin burning times with a total coin amount of up to 60 million HT

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You must have understood what Coin Burning is and what are the benefits by now, right? I hope this knowledge is of some help in participating in the cryptocurrency market.