Removal of Digital Assets (Crypto/NFT) from circulation.
Imagine seeing $1M cash burnt to ashes for whatever reason…how would you feel?
Burning token involves an indefinite removal of a digital asset from circulation to reduce its supply. Why would this happen? Or why would a project decide to burn its tokens?
Let’s go a bit technical now.
Token burn is not as simple as adding some fuel to fire rather it involves sending these digital assets to where they can never be gotten back forever…I mean till death do us part…lolz.
Have you ever seen a lock without a keyhole? Ok, imagine a lock without a keyhole. Now imagine a digital wallet that does not have a private key, that’s exactly what some people call eater address but I’m going to stick to “Burn Address”.
When a token is sent to the burn address something happens and that is the fact that it removes and takes away the digital asset from all supply and locks it up where no man can ever retrieve it.
( How to become Rich? Try to discover a way to retrieve these tokens…thank me later)
Did I say this process of sending a token to a burn address will do just one thing? Sorry, that was a lie it will also lead to an increase in the price of that token because it’s not in supply anymore.
Flashback to the law of demand and supply.
When there is a high demand for an asset less in supply, the price will always go higher…now you got it.
Wondering why projects engage in Burn Token?
Consider it the same way companies buy back their shares to return values to the investors in the form of higher price for the security. So it’s a good news though it doesn’t always have immediate effect on prices.
Do you know of any project that has burnt their token before? Let me know in the comments.
Hope you learnt something new today.
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