Easy
Burn in crypto, or "tokens burning" consists in permanently removing a token from traffic. This is done by sending the Tokens to an inaccessible address called Burn Address . This action, often perceived as a deflationary strategy, aims to influence the dynamics of supply and demand, and potentially stabilize or increase the value of a digital asset.
In this article, we will explore why, how tokens burn is used. We will also see concrete examples, such as those ofEthereum and Beam, to illustrate the real impacts of this practice.
Table of contents
Why burn tokens? The objectives behind burn
Burn Crypto serves several strategic objectives, often adapted to the specific needs of a blockchain :
Create a rarity : by reducing the supply in circulation, the remaining tokens become rarer. If demand remains constant, this rarity can lead to an increase in their value.
Fighting inflation : some cryptocurrencies like Ethereum use burn to control inflation. With the introduction of EIP -1559 , part of the transaction costs are burned. The EIP-1559 is an update of the Ethereum which has modified the way in which the transaction costs are calculated, by introducing an “Fee base” automatically destroyed with each transaction. This mechanism reduces the supply of ETH and slows down its growth, which promotes stabilization or an increase in the value of long -term assets.
Improving investor confidence : during ICO or IDO , projects can commit to burning unsold tokens to guarantee optimal supply management, thus reassuring investors.
Rewarding existing holders : reducing the total tokens supply can be perceived as an indirect Airdrop When the offer decreases, the value of the remaining tokens increases proportionally.
More information here
How does Burn in crypto work?
The burn process is based on the use of blockchains technologies:
Creation of an address from Burn : A Burn Address is a private key portfolio , which makes it impossible to the tokens sent to it.
- Concretely, the address works as a "digital bin". Once the tokens are transferred, they become unusable forever.
Execution of the transaction : project developers or users themselves send tokens to this address. The operation is transparently recorded on the blockchain, and anyone can check that the burn has taken place.
Burns automation : Some projects incorporate automatic mechanisms. For example, each transaction on Ethereum from EIP-1559 burns part of the costs in the form of ETH.
Burn programmed or punctual : projects like Binance periodically burn tokens, while others can carry out punctual burns to respond to specific events.
Concrete example:Ethereum burn with EIP-1559
The introduction of EIP-1559 in August 2021 marked a major evolution in the management of transaction costs on Ethereum . From now on, part of the transaction fees, called the FEE base , is automatically burned, thus reducing the offer in ETH circulation. Since its implementation, millions of Eth have been burned, with a notable peak of 71,718 ETH burned in a single day on May 1, 2022 , representing a colossal sum on the market at that time.
The graph below shows the daily quantity of Ether burned. If certain days, such as September 1, 2024, display a minimum amount of 80 ETH burned , periods of intense activity on the network, marked by high transaction costs, amplify the Burn mechanism.
Impact of Burn on Ethereum :
-
Reduction of inflation : before EIP-1559, the total ETH offer increased constantly due to mining awards. With the automation of burn, part of the new ethics emitted is offset, thus stabilizing the global offer.
-
Increased rarity : by regularly removing ETH from circulation, this deflationary mechanism contributes to supporting the long -term value of the assets, especially if demand remains stable.
Example of Burn mechanism: Beam's case
Beam, a project focused on the decentralized gaming ecosystem, perfectly illustrates the strategic use of tokens burn to manage the internal economy and encourage the commitment of the participants. Since its launch, Beam has carried out regular tokens burning operations, some of which are particularly striking.
A historic burn: November 2, 2022
on November 2, 2022, Beam has made his biggest tokens burn to date, destroying a total of 19.83 billion Beam , equivalent to $ 137.97 million at the time of the operation. This massive destruction has reduced the supply in circulation significantly, thus increasing the rarity of token.
An aligned mechanism on MIP-7
according to the MIP-7 strategy adopted by the project, 15 % of the profits generated by the investments of the ecosystem are used to buy and burn Beam tokens. In addition, the costs collected on the Beam network are also integrated into this process. This model aims to strengthen the value of the token while aligning the incentives of participants in decentralized governance of Beam.
Last example: January 2025
on January 4, 2025, Beam further reinforced his commitment with a new burn of 88.8 million Beam , a cumulative value of $ 2.61 million . These tokens came from the costs collected on the platform and the decisions taken by the community. This action has once again demonstrated Beam's transparency and commitment to its users.
Impact on project economy
Tokens burning at Beam has multiple impacts:
- Reinforced governance DAO decisions (decentralized autoomous organization).
- Community commitment : Regular Burns encourage participants to keep their tokens and actively contribute to the development of the ecosystem.
- Price stabilization : by reducing the total supply, Beam maintains a balance between demand and accessibility of token for new entrants.
This type of approach, mixing reduction in supply and community incentives, positions Beam as a relevant example of economic management within the Crypto universe.
Controversies around token burn
If Burn has many advantages, it is not without criticism or risks:
- Market manipulation : Some projects use burn as a marketing strategy to attract investors, without real long -term utility.
- Concentration of power : if burned tokens are mainly those held by the community, project teams can increase their control over the remaining offer.
Conclusion: Burn, a powerful but double -edged strategy
Burn in crypto is a tool that is mainly to maintain scarcity, stabilize inflation or strengthen investors' confidence, it plays a key role in the management of the economy of tokens. Its effectiveness depends on the transparency and objectives of the project.
For investors and enthusiasts of decentralized finance, understanding the mechanisms behind burn can offer precious insights to assess the health and long -term strategy of a crypto project.
Complementary readings in Burn : To improve your knowledge around tokens management, click on fat words to learn more about the jacket and the Airdrop .
Investments in cryptocurrencies are risky. Crypternon could not be held responsible, directly or indirectly, for any damage or loss caused following the use of a property or service put forward in this article. Investments linked to cryptocurrencies are risky by nature, readers must do their own research before undertaking any action and investing only within the limits of their financial capacities. Past performance does not guarantee future results. This article does not constitute an investment .
Certain links of this article are affiliated, which means that if you buy a product or register via these links, we will collect a commission from our partner. These commissions do not train any additional cost for you as a user and certain partnerships allow you to access promotions.
AMF recommendations. There is no guaranteed high yield, a product with high performance potential implies a high risk. This risk taking must be in line with your project, your investment horizon and your ability to lose part of this savings. Do not invest if you are not ready to lose all or part of your capital .
To go further, read our pages legal notices , privacy policy and general conditions of use .
Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
