{"id":10137,"date":"2023-01-09T04:02:37","date_gmt":"2023-01-09T04:02:37","guid":{"rendered":"https:\/\/www.bitnovo.com\/blog\/?p=10137"},"modified":"2025-09-10T15:24:08","modified_gmt":"2025-09-10T15:24:08","slug":"what-is-token-burning","status":"publish","type":"post","link":"https:\/\/www.bitnovo.com\/blog\/en\/what-is-token-burning","title":{"rendered":"What is token burning?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Alternar tabla de contenidos\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-token-burning\/#why_is_token_burning_performed\" >Why is token burning performed?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-token-burning\/#how_is_token_burning_carried_out\" >How is token burning carried out?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-token-burning\/#what_is_the_purpose_of_the_companies_performing_token_burning\" >What is the purpose of the companies performing token burning?<\/a><\/li><\/ul><\/nav><\/div>\n<span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span><p>A token burn means permanently\u00a0<strong>eliminating<\/strong>\u00a0a set of cryptocurrencies that exist on the network and are in circulation. Although this practice seems to go to extremes, it is quite common. This is a\u00a0<strong>strategy<\/strong>\u00a0carried out by some projects.<\/p>\n<p>The purposes of token burning are usually<strong>\u00a0deflationary<\/strong>. The main idea for carrying it out, usually, is to stabilize the\u00a0<strong>price<\/strong>\u00a0of a token or some coin in the market.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"why_is_token_burning_performed\"><\/span><strong>Why is token burning performed?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>This action is usually carried out by the creators of cryptocurrencies. In this way, a specific number of the total number of tokens in circulation are \u201c<strong>burned<\/strong>\u201c. This is achieved by permanently removing a certain amount of tokens from the network.<\/p>\n<p>The main cryptocurrencies we know such as Bitcoin or Ethereum do not have a token burning program, however, many\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-are-altcoins\/\">altcoins<\/a>\u00a0do use them.<\/p>\n<p>As we have already said, the main objective of\u00a0<strong>token burning<\/strong>\u00a0is usually\u00a0<strong>deflation<\/strong>, but this is not the only one. This mechanism is usually used by tokens and smaller coins because in this way they can\u00a0<strong>control the number<\/strong>\u00a0in circulation and at the same time they can provide greater incentives to investors.<\/p>\n<p>Token burning does not exclusively represent\u00a0<strong>cryptocurrencies<\/strong>, as central banks routinely collect and destroy spent coins and bills in exchange for new ones. However, in the FIAT world there are other forms of<strong>\u00a0regulation<\/strong>\u00a0used for the same purpose. The burning of cryptocurrencies can be compared to share buybacks conducted by public corporations to\u00a0<strong>reduce<\/strong>\u00a0the amount of\u00a0<strong>shares<\/strong>\u00a0available and thus raise their\u00a0<strong>price<\/strong>.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"how_is_token_burning_carried_out\"><\/span><strong>How is token burning carried out?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>There are many ways to initiate a cryptocurrency burn in order to reduce the amount of cryptocurrencies\u00a0<strong>available<\/strong>. The tokens are\u00a0<strong>disabled<\/strong>\u00a0for future use. To achieve this, the most common way is for project developers to\u00a0<strong>buy<\/strong>\u00a0a certain amount of cryptocurrencies and\u00a0<strong>take them out of circulation<\/strong>\u00a0on the market. Removing them from circulation is possible thanks to an<strong>\u00a0unrecoverable public wallet<\/strong>.<\/p>\n<p>Cryptocurrencies are sent to the<strong>\u00a0private address<\/strong>\u00a0of this wallet which is known as \u201c<strong>eater address<\/strong>\u201c. This is visible to all nodes, but at the same time it is permanently frozen. The address to which tokens are sent is called \u201c<strong>Burn<\/strong>\u201d address.<\/p>\n<p>This address is\u00a0<strong>unidirectional<\/strong>\u00a0and does not have the possibility of\u00a0<strong>reversing<\/strong>\u00a0the transaction or\u00a0<strong>withdrawing<\/strong>\u00a0the cryptocurrencies it contains, since there is no private key corresponding to that address. As the entire asset it contains can never be recovered, it is considered \u201c<strong>burned<\/strong>\u201d even though it still exists.<\/p>\n<p>There are many ways to perform token burning. Each project chooses one of them. Some may do a<strong>\u00a0one-time burn<\/strong>\u00a0when it completes its\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/what-is-an-ico-initial-coin-offering\/\">ICO<\/a>\u00a0(Initial Cryptocurrency Offering). This removes the amount of unsold cryptocurrency from circulation and at the same time\u00a0<strong>incentivizes<\/strong>\u00a0participants.<\/p>\n<p>Another way to carry out the process is to\u00a0<strong>burn<\/strong>\u00a0cryptocurrencies every certain\u00a0<strong>period<\/strong>\u00a0of time with\u00a0<strong>fixed or variable<\/strong>\u00a0volumes. Each project chooses the tactic that favors the cryptocurrency the most.<\/p>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div id=\"image_1068057009\" class=\"img has-hover x md-x lg-x y md-y lg-y\">\n<div class=\"img-inner dark\"><img fetchpriority=\"high\" decoding=\"async\" class=\"attachment-large size-large lazyloaded\" src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu%C3%A9-es-la-quema-de-tokens-1.jpg\" sizes=\"(max-width: 768px) 100vw, 768px\" srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu\u00e9-es-la-quema-de-tokens-1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu\u00e9-es-la-quema-de-tokens-1-300x205.jpg 300w\" alt=\"Qu\u00e9-es-la-quema-de-tokens\" width=\"768\" height=\"526\" data-srcset=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu\u00e9-es-la-quema-de-tokens-1.jpg 768w, https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu\u00e9-es-la-quema-de-tokens-1-300x205.jpg 300w\" data-src=\"https:\/\/www.bitnovo.com\/blog\/wp-content\/uploads\/2021\/03\/Qu\u00e9-es-la-quema-de-tokens-1.jpg\" data-sizes=\"(max-width: 768px) 100vw, 768px\" \/><\/div>\n<\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<div class=\"is-divider divider clearfix\"><\/div>\n<h2><span class=\"ez-toc-section\" id=\"what_is_the_purpose_of_the_companies_performing_token_burning\"><\/span><strong>What is the purpose of the companies performing token burning?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div class=\"is-divider divider clearfix\"><\/div>\n<p>Many of the projects use token burning to\u00a0<strong>keep<\/strong>\u00a0the value of their cryptocurrency\u00a0<strong>stable<\/strong>\u00a0while incentivizing traders to maintain the use of the cryptocurrency. Whatever their goal, token burning is a\u00a0<strong>deflationary<\/strong>\u00a0mechanism.<\/p>\n<p>It is usually carried out by companies to\u00a0<strong>increase the value<\/strong>\u00a0of each coin by\u00a0<strong>reducing<\/strong>\u00a0the supply in circulation. This is because theoretically, if fewer coins are available, their value will increase and each particular coin will become more valuable.<\/p>\n<p>This tactic works even better on cryptocurrencies with\u00a0<strong>limited<\/strong>\u00a0supply which are the vast majority, as these in particular will never be able to produce the lost amount again. An example of this type of cryptocurrency is Bitcoin although this does not perform cryptocurrency burning.<\/p>\n<p>Other cryptocurrencies use this procedure to\u00a0<strong>correct errors<\/strong>. An example of an error is the Tether company. It mistakenly created $5 billion in USDT and had to burn it to\u00a0<strong>maintain<\/strong>\u00a0its 1:1 parity with the US dollar.<\/p>\n<p>There is a particular case in token burning which is that of\u00a0<strong>Security Tokens<\/strong>. These work like\u00a0<strong>corporations<\/strong>\u00a0with share buybacks. By entitling holders to project dividends, coins can be repurchased at a reasonable price and then burned thereby\u00a0<strong>increasing<\/strong>\u00a0the value of each holder\u2019s shares.<\/p>\n<p>There are other coins like\u00a0<a href=\"https:\/\/www.bitnovo.com\/blog\/en\/buy-xrp\/\">Ripple<\/a>\u00a0that use burns to prevent spam attacks and transactions by adding a\u00a0<strong>layer of security<\/strong>\u00a0to their platform. Ripple burns the fees charged on each transaction to remove the incentive to overload the network and make a quick profit. It also manages to\u00a0<strong>protect<\/strong>\u00a0against distributed denial-of-service or\u00a0<strong>DDoS<\/strong>\u00a0attacks.<\/p>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"span-reading-time rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Tiempo de lectura:<\/span> <span class=\"rt-time\"> 3<\/span> <span class=\"rt-label rt-postfix\">minutos<\/span><\/span>A token burn means permanently\u00a0eliminating\u00a0a set of cryptocurrencies that exist on the network and are in circulation. Although this practice seems to go to extremes, it is quite common. This is a\u00a0strategy\u00a0carried out by some projects. The purposes of token burning are usually\u00a0deflationary. The main idea for carrying it out, usually, is to stabilize the\u00a0price\u00a0of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":8092,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[185],"tags":[],"class_list":["post-10137","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain-en"],"_links":{"self":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/comments?post=10137"}],"version-history":[{"count":2,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10137\/revisions"}],"predecessor-version":[{"id":24684,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/posts\/10137\/revisions\/24684"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media\/8092"}],"wp:attachment":[{"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/media?parent=10137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/categories?post=10137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bitnovo.com\/blog\/wp-json\/wp\/v2\/tags?post=10137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}