Coin burning is the permanent removal of coins from circulation, making them unusable in order to reduce the total supply in the market. When this process is done by individuals, there is not much benefit, but if it is done collectively or by developers and has a purpose, it can give very positive results. Inflation is prevented by burning coins.
All burned coins are recorded as a transaction on the blockchain. This means that this process is completely transparent and the coins destroyed can be verified by anyone.
How to Burn a Coin?
To make the coins unusable, developers take the coins and send them to private addresses with unreachable private keys. In this way, nobody can access these coins.
The coin burning process is carried out with the following steps:
The coin holder creates a request by specifying the will and the amount of the coin to burn.
Afterwards, it is confirmed that this person has a coin in his wallet and the amount.
If the person making the request has enough coins, the coins will be dropped from the wallet, the amount of coins will be updated and the coins will be burned.
You should remember that it is not possible to undo this transaction after burning the coins.
What are the Benefits of Coin Burning?
Its biggest benefit is to lower the total supply. Deflation is created when the aggregate supply is reduced and the price rises. In this way, supply-demand balance is achieved.
Apart from the benefits of the coin burning process, the token holders of the burned coin also benefit from this process.
Through the coin burning process, security is increased and transactions are accelerated.
Coins increase their sustainability.
What are the Purposes of Coin Burning?
There are several different purposes of burning coins, but in general, we can list:
Creating a new coin (proof of burn),
To reward coin owners and benefit them,
Destroying unsold coins after ICO or coin sale.