What does burning a coin mean? Can it tackle inflation
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➡Coin-burning is the intentional and permanent elimination of a portion of cryptocurrency coins from circulation. It is done by sending cryptocurrency tokens to an eater address, also known as a ‘blackhole.’ It is a wallet address where no one holds the private key. Without the private key, these tokens cannot be accessed by anyone and are lost forever.
Although creating an artificial supply crunch might seem like an illegal market manipulation technique, it definitely isn't!
This act is primarily done to control the price of the particular coin. All the transactions are recorded on the blockchain and cannot be altered. Therefore, everyone can verify that the coins were actually burned. Burning a portion of the entire circulation decreases the supply, thereby increasing its relative scarcity.
➡How did coin-burning as a concept evolve?
It is not a new concept at all. Although coin burning in cryptos gained huge popularity recently, a similar concept exists in the case of stocks. Companies buy back shares thereby reducing the total circulation, creating an artificial supply crunch.
One of the most notable instances of coin burning was when Vitalik Buterin, the co-founder of Ethereum burned more than 90% of his Shiba Inu tokens. More recently, with the London Hard Fork, close to half a million dollars worth of Ethereum is being burned every hour.
➡Can all coins be burnt or only some specific ones?
All cryptocurrency coins can be burnt. The decision to burn tokens usually resides with the developer/miner/team behind the particular coin.
➡What is Proof-of burn?
Proof-of-Burn is a consensus mechanism implemented by a blockchain network that operates on the principle of allowing miners to burn virtual currency tokens. Proof-of-burn is like the Proof-of-Work mechanism without the energy wastage.
Proof-of-burn involves a mechanism that promotes burning crypto regularly to prevent unfair advantage to the first movers. It also helps to maintain mining power. Instead of a one-time affair, the Proof-of-burn engages miners to carry it on as a routine activity.
➡What it's the need to burn coins and how is it beneficial for the investor?
There might be different reasons to burn cryptocurrency coins. The most notable objective is to create a deflationary effect. Removing a large portion from circulation causes a supply crunch. It drives the coin price higher. It makes existing investors pretty happy as the value of their investments is now higher.
Additionally, coin burning provides a natural mechanism to prevent spam attacks against something called the Distributed Denial of Service Attack (DDOS). Therefore, it acts as a safeguard for the network.
After the London Hard Fork upgrade to the Ethereum network, around 3.17 ETH is being burned every minute. To put this into perspective, as of today’s ETH price of $3100, around half a million dollars worth of ETH is being burned every hour.
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Keep supporting:)
-Mudrex
➡Coin-burning is the intentional and permanent elimination of a portion of cryptocurrency coins from circulation. It is done by sending cryptocurrency tokens to an eater address, also known as a ‘blackhole.’ It is a wallet address where no one holds the private key. Without the private key, these tokens cannot be accessed by anyone and are lost forever.
Although creating an artificial supply crunch might seem like an illegal market manipulation technique, it definitely isn't!
This act is primarily done to control the price of the particular coin. All the transactions are recorded on the blockchain and cannot be altered. Therefore, everyone can verify that the coins were actually burned. Burning a portion of the entire circulation decreases the supply, thereby increasing its relative scarcity.
➡How did coin-burning as a concept evolve?
It is not a new concept at all. Although coin burning in cryptos gained huge popularity recently, a similar concept exists in the case of stocks. Companies buy back shares thereby reducing the total circulation, creating an artificial supply crunch.
One of the most notable instances of coin burning was when Vitalik Buterin, the co-founder of Ethereum burned more than 90% of his Shiba Inu tokens. More recently, with the London Hard Fork, close to half a million dollars worth of Ethereum is being burned every hour.
➡Can all coins be burnt or only some specific ones?
All cryptocurrency coins can be burnt. The decision to burn tokens usually resides with the developer/miner/team behind the particular coin.
➡What is Proof-of burn?
Proof-of-Burn is a consensus mechanism implemented by a blockchain network that operates on the principle of allowing miners to burn virtual currency tokens. Proof-of-burn is like the Proof-of-Work mechanism without the energy wastage.
Proof-of-burn involves a mechanism that promotes burning crypto regularly to prevent unfair advantage to the first movers. It also helps to maintain mining power. Instead of a one-time affair, the Proof-of-burn engages miners to carry it on as a routine activity.
➡What it's the need to burn coins and how is it beneficial for the investor?
There might be different reasons to burn cryptocurrency coins. The most notable objective is to create a deflationary effect. Removing a large portion from circulation causes a supply crunch. It drives the coin price higher. It makes existing investors pretty happy as the value of their investments is now higher.
Additionally, coin burning provides a natural mechanism to prevent spam attacks against something called the Distributed Denial of Service Attack (DDOS). Therefore, it acts as a safeguard for the network.
After the London Hard Fork upgrade to the Ethereum network, around 3.17 ETH is being burned every minute. To put this into perspective, as of today’s ETH price of $3100, around half a million dollars worth of ETH is being burned every hour.
----------------------------------------------------------------------------------------
Keep supporting:)
-Mudrex
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