What Is Coin Burn?
Also known as: Token Burn, Coin Burning, Token Burning
In short
A coin burn is the permanent removal of a certain amount of cryptocurrency from circulation, by sending it to an address nobody can access or through a smart contract function; the goal is usually to reduce the total supply.
In a burn, coins are sent to a burn address whose private key is unknown, or are deducted from the total supply by calling the burn function in the token contract. Because the transaction is recorded publicly on the blockchain, the burned amount can be verified through a block explorer. Burned coins cannot be recovered.
Burning is used for different purposes. Some projects use a portion of their revenue to buy tokens back from the market and burn them (buyback and burn); the regular burns carried out for BNB are an example. In Ethereum, the base fee of every transaction is automatically burned with EIP-1559. Some bridges, meanwhile, work by burning the token on one chain and re-minting it on the other chain (burn and mint).
A reduced supply alone is not a guarantee of a price increase. If one does not evaluate together whether the burned tokens come from an already locked team or treasury allocation, the ratio of the burn amount to the total supply, and the pace of new issuance, burn announcements can turn into a misleading marketing tool.
Last updated: · This content is for information purposes only and is not investment advice.