Burning crypto means permanently removing tokens from circulation by sending them to a wallet address that no one can access or retrieve funds from. This process effectively destroys the assets, reducing the total supply. Bitcoin has several known burn addresses, while Ethereum commonly uses the address 0x000000000000000000000000000000000000dEaD for this purpose. Burn addresses are typically tagged as such on block explorers.
Why Do Projects & People Burn Crypto?
Crypto burning serves several strategic purposes.
One of the main reasons is to reduce token supply, which can increase scarcity and potentially drive up the value of the remaining tokens. It’s also a tool for managing inflation, especially in ecosystems where token issuance is ongoing.
Projects may burn tokens to signal long-term commitment and responsibility to their communities, demonstrating that they’re not focused solely on short-term profits. Additionally, burns can generate hype, particularly when promoted as a milestone or part of a major update, creating excitement and investor interest.
Some projects also use burns as a way to reward holders indirectly, as a reduced supply can enhance each token’s value.
How Does Crypto Burning Work?
To burn crypto, you simply send it to a burn address on the corresponding blockchain; an address from which the tokens can never be retrieved. These burn addresses have no private keys, meaning no one can access or spend the funds once they’re sent there.
There are two main ways burning is carried out: manually and automatically via smart contracts. In a manual burn, a project’s team deliberately sends a specific amount of tokens to a burn address, usually announcing the event in advance to build hype or signal commitment. These burns are often one-off events tied to milestones or promotional strategies.
On the other hand, smart contracts can implement auto-burning mechanisms. This is commonly used in tokenomics models made popular by SafeMoon where a small portion of each transaction is automatically burned. This helps maintain a deflationary token supply and incentivizes long-term holding.
Real-World Examples
BNB uses two burning mechanisms to control its supply. Quarterly Auto-Burns calculate how much BNB to burn based on its price and the number of blocks produced on the BNB Chain. This transparent and predictable model aims to eventually reduce the total supply to 100 million BNB. In parallel, the BEP-95 protocol burns a portion of BNB in real time from gas fees used on-chain, accelerating deflation. Notably, Binance’s 14th quarterly burn alone destroyed over 3.6 million BNB.
Shiba Inu’s supply reduction relies on community-led efforts. SHIB holders frequently burn tokens by sending them to dead wallets. Massive burns have occurred, including daily spikes like 38 million SHIB and surges over 22,000% in burn rate. Shibarium, SHIB’s Layer 2 network, adds automated burn mechanisms tied to ecosystem usage. While over 410 trillion SHIB have been burned, supply remains high, but continued burns may support future value.
Ethereum’s EIP-1559 upgrade introduced base fee burning, where part of every transaction fee is permanently destroyed. This creates deflationary pressure, especially during high activity, and has led to millions of ETH being burned, supporting long-term value and network health.
What Happens After Burning Crypto?
Once crypto is burned, it’s permanently removed from the circulating supply. No one, not even the sender, can retrieve it.
Burns reduce the total supply, potentially increasing scarcity, which may lead to price appreciation if demand remains strong. For holders, it can signal a project’s commitment to long-term value, improving confidence. Market perception often becomes more bullish, especially when burns are substantial or consistent. However, the actual impact on price depends on broader market conditions and investor sentiment.
FAQ: Token Burning
Can you get burned crypto back?
No. Once crypto is sent to a burn address, it’s gone for good.
Is burning the same as sending funds to a black hole wallet address?
Yes. Back hole wallet addresses are the lingo in the XRP community for burn addresses.
Is burning legal and trackable?
Like all on-chain actions, everything is recorded and trackable. Regarding the legal question, burning funds should be legal, as long as they are your own, but different jurisdictions have different laws. Please consult with a legal expert in your local area.
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