What is Coin Burning?
Coin burning – as the name suggest – is a process of intentionally ‘burning’ or eliminating the coins by rendering it unusable. This is done by sending a portion of the coins to an ‘eater address’, which is often referred to as a ‘black hole’ since the private keys to that address are not obtainable by anyone. Therefore, any coins sent to an eater address are unrecoverable and cannot be used again, forever! These coins are effectively taken out of circulation and is publicly recorded and verifiable on the blockchain.
I particularly find coin burn a good thing and like holding some tokens/coins that implement some type of burn because it almost guarantees decent returns.
In order to understand this, we need to understand the basic economic laws of demand and supply.
Scarcity is a central economic concept that gives value to a particular asset and in this case, cryptocurrency. Unlike fiat currencies, cryptocurrencies are deflationary in nature. This means that the coin supply for most cryptocurrencies are fixed, with no additional coins created once it has reached its total supply count. The best example is Bitcoin, which has a fixed supply of only 21 million; if demand increases, prices would increase since there is a limited number of Bitcoin in circulation. Likewise, if the supply of Bitcoin further decreases – due to burning, lost private keys or forgotten Bitcoins – then prices would similarly increase since there is now a lesser amount of Bitcoins to satisfy people’s demands.
Coin burning reduces the total supply in circulation since the coin is intentionally destroyed. It is an effective method of increasing and stabilizing the valuation of coins and tokens. Economic principles dictate that reducing the quantity of something makes it much more valuable!!!
Coin burning is an effective tool to signal a firm commitment by a cryptocurrency project. The goal of any project is to add significant value to coin holders, who will probably be the core users and supporters of their service.
Summing it All Up
Coin burning is a relatively novel approach in a protocol or policy level for cryptocurrency projects to consider, with various implementations and features that can be adopted. The benefits of integrating a coin burning mechanism is wide-ranging, from being a more environmentally-friendly consensus mechanism to enhancing long-term value for coin holders. It could also be used to sidestep securities law that govern dividend-paying securities. More than that, coin burns represents a viable tool in preserving wealth for all participants in the network.
THE MATH : Coinmarketcap
RANK 114 $25.208.057 USD
Circ supply ----> 20.524.490 mill
After Coinburn
Approx Circ supply ----> 3.5 mill
Basically if demand stays the same or even increases, and we stay at around 100 - 110 levels on marketcap.
This would mean a price appreciation of around ~ 600%
And a price of around $7-8
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