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What is Coin Burning? The main Goal of Coin Burning

Coin Burning (also known as “coin burning” or “token burning”) is a fairly common action in the crypto world. A process by which miners remove coins from circulation This will help reduce the number of coins and tokens in circulation, thereby increasing the value of those coins and tokens.

According to the law of supply and demand, a decrease in the total supply of coins will increase the value of investors’ shares.

The main aim is to promote long-term sustainability and create a balance on both sides of the buyer and seller. It is important to help regulate the supply when it is too much and to ensure that the price of the tokens is stable. When conducting a coin burn, miners will observe that the amount of money they have will decrease, and the value of the coins will increase.

Background on Coin Burning

Coin burning is one of the burnable currencies. It is similar to buying back shares. The plan of the companies is to buy back their shares to reduce the total number of shares outstanding. This process is seen as treasury stock and is intended to boost the value of the stock.

Coin burning helps to consolidate the value of shares in circulation. The fewer shares outstanding, the higher the net worth earned per share. Moreover, the coins that are burned will become rare and extremely valuable.

BuyBack and Burn Coin/Token Mechanism

BuyBack and Burn simply means the acquisition of tokens and, at the same time, burning that number of tokens. This helps increase long-term value and ensures sustainability for investors, providing them with more confidence and investments to hold.

And this process will help the tokens avoid extreme volatility and consolidate the token value at a stable level, neither too high nor too low.

When do we Burn Coin?

Coin burning is free and not mandatory, so each person will have their own strategy for development.

For tokenomics projects that do not have a reasonable design that will put the tokens under a lot of pressure from the tokens being inflated, the only way to solve this problem is to burn the coin. This will reduce the pressure and also give investors time to find more solutions.

On the contrary, even though they are newly launched projects and have only a few holders, the burning of coins will be similar to promotion. Since they are new projects, burning tokens is pointless and it is difficult to achieve immediate success. Another way to reduce the burden is to hold the tokens for a period of time, then gradually bring them to the market to practice adapting and have a lot of motivation to develop.

The challenge of Coin Burning

Tokennomics equilibrium

According to the law of supply and demand, when the supply decreases, the value will increase.

  • The ongoing rise in investment prices will limit purchases and reduce trading volume.
  • If a token is created for an extended period of time without being sold, investors will stop purchasing tokens in order to avoid losses.

Posing a significant challenge to the Blockchain platform

Blockchains with a stable supply, such as Bitcoin, Cardano, Polygon, etc., will not apply coin/token burning to avoid permanently burned coins/tokens affecting the supply.

If it is too long, the price of tokens will increase in parallel with the development of the whole system. At that time, the owner will have to spend a large amount of money to pay for the transaction, and at the same time, it will not be able to make many transactions and affect the entire ecosystem.

The impact of Coins on the market and with Investors

In the marketplace

Currently, it has not been proven that burning coins will do any harm to the environment and will also help stabilize the market. Because of this, many analysts say, “Those coins will help create long-term stability and increase the viability of the electronic market.” However, burning coins not only has an important position, but it also helps to support the currency and shows commitment to the project team.

For investors

It has two important reasons:

  • Firstly, when burning coins, investors will receive tangible benefits after stabilizing the price.
  • Second, self-regulation will help stabilize prices without the intervention of a regulatory agency.

Is Burning Coins the optimal solution?

Burning coins helps to reduce inflation, promote price growth, create a FOMO effect and attract investors’ capital.

On the contrary, when the market goes bad, burning coins will come into play. But it is necessary to pay attention to some things, such as when burning coins, it is impossible to get them back. In the long term, the tokens will become scarcer and their value will increase.

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