Coin Burn means coin burning. It is defined as the process of reducing the total supply by permanently removing cryptocurrencies from circulation.
What is Coin Burn?
“Coin Burn” or “Coin Burn”, which is quite common in the cryptocurrency ecosystem, is a method of reducing the supply of cryptocurrency. It means that a certain amount of crypto assets are permanently out of circulation. This method, which is generally applied by the developers of the project, is the burning of a certain amount of existing tokens, that is, their deliberate removal from circulation. The method applied to incentivize investors and price stabilization is mostly used by altcoins and small-scale tokens to control the number in circulation.
Many cryptocurrency developers have done this by burning thousands, millions or even billions of coins within certain plans. Although it is a process that anyone can perform, unplanned incineration causes great losses. For this reason, usually the coin burning process is carried out by the developers of a cryptocurrency. With the method implemented to reduce the supply, the tokens of the cryptocurrency are less available, which causes its price to rise. In this way, it can benefit investors. Most cryptocurrencies, especially Bitcoin, have limited supply for this reason. However, the same is not true for all currencies.
Burning is generally done for price increases. The coin burn is likened to previous stock buybacks from cryptocurrencies. It means that the issuing companies buy back their shares at the market price and reduce their number in the market. Coin burns and stock buybacks are similar concepts that serve the same purpose.
How to Burn Coins?
The biggest feature of incineration is to reduce the total supply. With the burning of cryptocurrencies, the supply and demand balance in the market is ensured. Since the value of an asset cannot increase continuously in projects with limited total supply, a balance is achieved in the market by coin burning. Thus, a competitive environment is created with cryptocurrencies, whose supply is limited. Coin burning occurs when a certain amount of a cryptocurrency is sent to an unusable wallet to intentionally remove it from circulation. Cryptocurrencies sent to this address, which no one can access, are destroyed, never to be used again.
For the coin burning process, firstly, an unused dead coin address whose Private Key is not valid is created, and then the amount of coins desired to be burned is transferred to this address. Thus, the mentioned coins are permanently out of circulation. After the burning process, no one can use and access the burned cryptocurrency. Since there is no private key information, it is not possible for anyone to access it. For this reason, coin burning is a permanent process and cannot be reversed.
