If you are familiar with cryptocurrency, you have already heard of cryptocurrency burning. It is a method of cutting coin supply, which became popular in 2017. In the following article, you can learn more about cryptocurrency burning.
What is Cryptocurrency Burning
The action of cryptocurrency burning happens when the coin is unintentionally sent to the wrong unusable crypto wallet. The main objective of cryptocurrency burning is to remove the coin from circulation. There is no way of accessing or assigning the burn address or eater address. If you send the token to the wrong address, it has gone forever.
Any cryptocurrency owner can burn it. However, not everyone wants to do so without the right reason, as it is the same with throwing money away.
Developers are the ones who do so. They decide to burn a certain amount of cryptocurrency. Burning coins reduces the supply, making cryptocurrency tokens rare. As a result of the scarcity, prices may rise, resulting in a profit for investors. There are a few things to keep in mind regarding coin burning. It does not guarantee that the value of the cryptocurrency will rise. Many people believe it provides little or no benefit.
How It Works?
You can verify the portion of the coins burnt on the blockchain. To burn them, you need to send the coins to a wallet no one has access to. There are several ways of burning the coin, the most common is to send the coins to a so-called eater address. Its current balance is publicly visible on the blockchain, but access to the contents is unavailable.
Can you burn any coin you want?
Can you burn any cryptocurrency? The answer is yes. You can send any cryptocurrency to the burn address, which means it’s possible to burn cryptocurrency with any of them.
Here are a few primary digital currency tokens that have been burned, along with the circumstances:
- Binance, a cryptocurrency exchange, began burning its Binance Coin quarterly in 2017. The exchange has pledged to continue doing so until half of the total Binance Coin supply has been depleted.
- In 2019, the Stellar Development Foundation (SDF) burned about half of the Stellar supply (55 billion XLM coins).
- In 2021, the developers of Shiba Inu (CRYPTO: SHIB) gave half of the supply to Vitalik Buterin, co-founder of Ethereum (CRYPTO: ETH), in what was most likely a marketing stunt. He instantly burnt 90% of the tokens and gave the rest away.
What is proof of burn?
Proof of burn is a consensus algorithm for validating and adding transactions to blockchains. The main objective is to prevent fraud and to process only legitimate transactions.
A blockchain is a digital ledger that keeps track of a cryptocurrency’s transactions, and its consensus algorithm is how it confirms transactions. Proof of work and proof of stake, are both of them the most prevalent consensus methods; proof of burn is a recent alternative. Some proof-of-burn cryptocurrencies require miners to burn the same cryptocurrency they are mining. Others allow miners to burn different sorts of cryptocurrency.
Proof of burn has the advantage of being a quick means to validate transactions and does not require as much energy as the proof-of-work paradigm.
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