What is Burn?
In cryptocurrency, a “burn” is the act of permanently removing tokens from the total supply. This is achieved by sending the tokens to a wallet address that can only receive tokens but not send them. This wallet is often referred to as a “burn address” or “eater address,” ensuring the tokens sent there cannot be retrieved or spent again, effectively removing them from circulation.
Token burning is used to create scarcity and can impact the token’s value. By reducing the supply, the remaining tokens may increase in value due to increased demand. Many cryptocurrencies, especially in decentralized finance (DeFi), use burning as a method to manage supply and demand, reward holders, or maintain a sustainable ecosystem. Some popular tokens, like Binance Coin (BNB), have regular “burn events” to reduce the circulating supply systematically.
Burns can also be part of smart contract functions, automatically programmed to burn a percentage of each transaction. For instance, every time a transaction occurs, a small fraction of tokens may be sent to the burn address, ensuring a gradual supply reduction over time.
Token burning helps maintain ecosystem health and align incentives by controlling inflation and increasing value for long-term holders.
