Token burn, now commonplace for new crypto projects?

As investors struggle to optimize their investments, projects seem to be increasingly deflationary and optimizing token burn.

Besides Bitcoin, the first of the cryptocurrencies and counting on a limited supply, the projects that succeeded did not necessarily try to limit their total supply to such a small amount of tokens. On the contrary, some have hundreds of millions of tokens, even billions and even trillions, as is the case with some memecoins in particular.

Likewise, token burn also seems to be in the crypto sphere recently and manages to create hype within the communities. Due to a deflationary strategy, investors rightly or wrongly expect the price of the concerned token to rise regularly, outside the cyclical aspect of the market (bull run and bear market).

As a reminder, token burn refers to the process of extracting a token from the circulating inventory of an involved project. The burning of the token is verifiable on the blockchain, which makes it possible to confirm with transparency the initiative taken and its proper functioning. When the tokens are withdrawn from circulation, the inventory is updated to reflect the new amount of tokens in circulation. For more information about the process, we have already discussed the topic at Be[In]Crypto France.

In general, depending on the project, token burn sometimes results in voluntarily sending tokens to a dead wallet. In particular, this is what is currently happening for the Shiba Inu project, which burns billions of tokens per week, or even the LUNC, of ​​which more than 3 trillion tokens have been sent to the available dead wallet.

Otherwise, the token burn is set up by, for example, exchanging tokens by the responsible institution from the collected trading fees or from the sale of tokens. This would soon be the case for the LUNC token, with a 1.2% incineration tax planned for September 12 on any purchase or sale of tokens.

LUNC (Terra Classic) and SHIB (Shiba Inu); masterclass in burning token

When the Terra ecosystem (now Terra Classic) collapsed in the spring and its main token experienced hyperinflation that was rare and unexpected in the crypto sphere, an incredible amount of tokens were gradually taken out of circulation.

At the end of August, more than 3 billion tokens were burned. This total was achieved thanks to sequential transmissions to the inferno wallet, or the dead wallet that receives the burned tokens. More recently, the price of the token has been in a panic as rumors of Binance being burned into the token continue.

On the other hand, according to the Shibburn, hundreds of millions of SHIBs are burned every day. For example, on August 31, more than 400 million SHIBs were withdrawn from circulation, an increase of +180% compared to the previous day. Although the dollar amounts are small, several billion tokens are burned every week.

Both the Shiba INU project and the Terra Classic are trying to multiply brand initiatives to accentuate and intensify the withdrawal of tokens, creating a certain hype within the community, even if the process can be slow and it takes patience to see a real impact on the price level.

An initiative that is not only limited to tokens with an almost unlimited supply

While we find this process in many new projects that are now trying to be deflationary from the get-go and give investors a sense that token prices will rise constantly, high-cap tokens also operate in this way.

Ethereum kicked off through its London update in August 2021 with EIP-1559 token burn. Millions of Ethereum have already been burned through this process, worth a total of several billion dollars.

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On the BNB Chain, Binance’s BNB token also has its own token burning program. Although the maximum supply is 200,000,000 BNB, the goal of the crypto exchange is to continue the burning program until the number of tokens in circulation is halved. Now, since the end of December, the “Quarter burn” made from a portion of the Binance exchange’s profits has been replaced by an auto-burn, which stops when 100 million tokens have been burned.

At the same time, Filecoin (FIL) or Stellar (XLM) tokens have also implemented a burning mechanism within the project.

This integrated mechanism is also adopted by a large number of new and small projects such as Brokoli Network, Tamadoge or Space SIP.

Indeed, the Tamadoge project, which was already popular in the industry before its release, will also have a burning system implemented in its Tama store, with a 5% fee on each transaction for these purposes.

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