A Coin or Token burn is simply the process of permanently withdrawing cryptocurrencies from circulation, hence limiting the overall supply, is known as coin burning.

This is often accomplished by sending the tokens in question to a burn address, i.e. a wallet from which they can never be reclaimed. This is sometimes referred to as destroying tokens. Most projects aim to reduce the overall quantity of tokens by burning them. In a nutshell, it generates a “deflationary” event, and the purpose of this action is often to boost the value of the remaining tokens because the assets tend to gain in price when the circulating quantity is reduced and they become more rare.

Some have equated token burning to a firm buying back its stock. In this approach, the corporation “returns the value” to its shareholders. To accomplish the same purpose, cryptocurrency projects burn their tokens.

When the token is burned, the price of the token does not necessarily rise overnight. Other news concerning the token can sometimes overshadow the impact. Alternatively, investors may anticipate a token burn and “price it in” at an early stage. Nonetheless, burning tokens tends to support an asset’s price in the long run and is regarded a positive move.