Crypto Dictionary
Burn
Definition
The process of permanently removing tokens from circulation.
Deep Dive
Token burning is a deliberate and irreversible process in which a certain quantity of cryptocurrency tokens is permanently removed from circulation. This is typically achieved by sending the tokens to an inaccessible wallet address, often referred to as a "burner address" or "eater address," for which no private key exists, effectively rendering the tokens unusable and non-spendable. Once tokens are burned, they are permanently destroyed, reducing the total supply of that particular cryptocurrency.
Examples & Use Cases
- 1Ethereum's EIP-1559 upgrade, which burns a portion of the transaction fees (base fee) instead of giving it entirely to miners, reducing ETH supply.
- 2Binance Coin (BNB) conducting quarterly burns of a percentage of its profits until 50% of the total supply is removed from circulation.
- 3Some stablecoin protocols burn their native utility token when new stablecoins are minted, or vice-versa, to maintain the peg or manage supply.
Related Terms
DeflationaryTokenomicsScarcity