What is Coin Burning? Cryptocurrency Coin Burning 2022
What is Coin Burning?
Coin burning is a process in which the burnt token is completely removed from the circulating supply. At the same time the total supply was also reduced. All projects have the same purpose of burning. And that is to reduce the total token amount.
To discuss the whole issue of burning we can discuss the burning process of a single project. And for the sake of this discussion I will use BNB’s burning process as an example.
The total supply of BNB was 200,000,000 BNB. It currently has a total supply of 176,406,561 BNB and a circulating supply of 144,406,560 BNB. This means 23,593,439 BNB have been burned for a total of 12 burns so far.
This burning process is done every 3 months which was mentioned earlier in their white paper. And Binance will continue their burning process until their total supply reaches 100,000,000 BNB. This means that 50% of their total supply will be burnt coins.
The projects that maintain their burning process, how and for how many days they will burn their tokens are usually mentioned in their white paper.
It may not be clear to many people how coins or tokens are burned. So let’s try to understand how burning works.
Read more: What is NFT or Non-Functional Token?
How do burning coins work?
Firstly, the theme is completely task-based. So a coin holder calls the burn function to burn a certain amount of coins or tokens.
Second, after calling the function, that call verifies the BNB contract address. And see if the amount of coins/tokens burned is equal to the amount of coins in the wallet?
Third, if there are not enough coins in that wallet, the call becomes invalid. And that burn function doesn’t get executed.
Fourth, and if there are enough coins in that wallet, the function is executed. This deducts the amount of coins/tokens called for burning. And finally the contract address is updated.
If the burn function is executed once to burn coins or tokens; However, as many coins and tokens are burned, the number of coins or tokens is canceled forever. There is no way to get those coins or tokens back.
On the other hand, anyone can use the burn function of BNB to burn from their wallet at any time. Whoever burns using this function will have the amount of coins withdrawn from the circulation function. And anyone can verify this. This means that everyone can see how much is burned.
Consequences of burning coins or tokens
We understand from the above discussion that the amount of coins or tokens burned is permanently excluded from circulation supply. On the other hand, the total supply is also updated and excluded from there as well.
In other words, the amount that is burned is deducted from the total amount of that coin forever. Which is never possible to get back. And when the circulation supply of a coin, the total supply is less than the current supply, it is easy to assume that the value of that coin may increase.
Because when supply is less than demand, it is very common for natural reasons to happen.
So it means if any coin or token is burnt; This is a very positive thing for those coin or token holders.
An example can be seen by looking at BNB. Since BNB will burn 50% of its total supply of coins. This means that out of 200 million coins, 100 million will burn. So hopefully the price will go to a very good level as far as it goes (personal opinion in particular).
Note:- Trading of coins or tokens will be done at your own risk.
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