Burn

A burn is the permanent removal of tokens from circulation. The tokens aren’t literally burned, but they can no longer be used by anyone.

What is a burn?

To burn tokens, a project sends them to a special wallet address called a burn address. No one has the private key, or secret access code, for this address. That means the tokens can never be moved or traded again.

A burn can happen manually or automatically. With an automatic burn, a smart contract, or program on the blockchain, carries out the agreed action. The burn is publicly visible on the blockchain.

A burn reduces the number of tokens in circulation. This can increase scarcity and limit inflation.

An example of a burn

Suppose a crypto project sends some of its tokens to a burn address. Anyone can see on the blockchain that the tokens have been sent there and are no longer available.

This reduces the number of available tokens. That’s exactly what a burn does: it permanently removes tokens from the circulating supply.

Why is a burn important in crypto?

In crypto news, you may sometimes see a project announce or carry out a burn. It may be a planned action or an automatic rule built into the network. Some projects use burns as part of their long-term plan.

Fewer tokens don’t automatically mean the price will rise. A price reaction also depends on demand for the token, the project itself, and conditions in the crypto market. An announcement about a burn may also mainly attract attention for a short time.

Pay attention to the size of a burn, too. A heavily publicized burn has little effect if only a small number of tokens are removed from circulation.