Token Burn

A token burn is a process in which a certain amount of a cryptoasset is removed from available circulation so that the units can no longer be used or are effectively inaccessible.

Blockchain systems may implement burning through designated addresses or protocol-level mechanisms. In some systems, burning occurs automatically as part of particular operations.

Why tokens are burned

• to reduce supply;
• to implement a predefined tokenomics model;
• to link protocol usage with changes in supply;
• to remove incorrectly created or excess units.

For example, a protocol may direct part of its fees into a burn mechanism. In such a model, higher network activity can potentially increase the amount of tokens burned.

Burning and price

A reduction in supply does not guarantee a higher price. Market price depends on both supply and demand, so the economic effect should be evaluated together with issuance and actual demand for the asset.