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Destruction

What is Token Burning?​

The act of burning tokens involves moving them to a place where they can never be retrieved, also known as an address of burning. Burning tokens effectively stops the circulation of such digital assets by permanently locking them in place. Burning tokens causes the price of tokens still in circulation to rise, and the price of an asset can be thought of as a form of supply and demand. If there are fewer assets available to investors than demand, the asset will command a higher price when traded. Conversely, if there are a large number of assets that cannot meet demand, the asset price will fall. By reducing the supply of tokens, the destruction of tokens can create an imbalance in demand, which usually raises the price of the tokens due to the increased scarcity of the asset.

Why Burn Tokens?​

  1. Sometimes crypto projects burn tokens like a company buying back stock, absorbing the cost of the stock and returning the value to investors in the form of a higher security price.
  2. some algorithmic stablecoins use burning as a method of fixing assets at a certain price. This mechanism reduces supply and better matches demand by burning tokens when asset prices are low.
  3. Some user nodes or mines will achieve earning rewards by running empty on their own transactions, which makes no sense for the blockchain. It makes the network processing slow and increases the common transaction time. Stop this behaviour by a small coin pin. It has little impact on individuals. Because only a very small portion is burnt.

Principles of the Burning​

A burning address is an inaccessible digital wallet because it has no private key attached to it, like a lock for which no one has ever built a keyhole. The burning mechanism sends tokens to the burning address effectively removing the digital asset from its overall supply, locking it in anyone's hands and preventing the asset from being traded again. As above, Transformers destroys tokens primarily in response to malicious transactions by users in control of most nodes to earn gas fees.