Token Burn

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Pronunciation

[toh-kuhn burn]

Analogy

burning is like taking physical cash and literally burning it in a verifiable way so everyone knows it's gone forever. The total amount of cash in existence decreases. This is done digitally by sending tokens to a 'black hole' from which they can never be recovered.

Definition

The process of permanently removing a certain number of tokens from circulation, effectively destroying them. This is typically done by sending tokens to an unspendable (an with no known ).

Key Points Intro

burning is a mechanism to permanently reduce the supply of a .

Key Points

Permanently removes tokens from the circulating supply.

Usually achieved by sending tokens to a verifiably unspendable 'eater' or 'burner' address (e.g., an address like `0x00...000` or one generated provably without a private key).

Can create deflationary pressure, potentially increasing the value of remaining tokens due to increased scarcity.

Used for various reasons: implementing deflationary tokenomics, reducing supply after an ICO, as part of transaction fee mechanisms (like EIP-1559).

Example

Binance Coin (BNB) conducts periodic burns based on exchange volume or profits, reducing its over time. 's EIP-1559 mechanism burns a portion of the fee for every .

Technical Deep Dive

The key to a token burn is ensuring the destination is truly unspendable. This is typically an known to have no corresponding , such as `0x0000000000000000000000000000000000000000` or `0xdead...dead`. Transactions sending tokens to these addresses are recorded on the like any other , providing public proof of the .

Related Terms

Blockchain & Cryptocurrency Glossary

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