Token burning - how it works?

The process of token burning is not complicated at all, just a little bit of reading about it and you can easily understand everything. The exchange burns the previously planned number of tokens every now and then. So nothing happens by chance. It depends mainly on what profits the exchange has from turnover. Thanks to this, the cryptocurrencies become more valuable and tempt potential buyers.

The exchange has the task of buying back at least 20 percent of the domestic tokens every quarter and destroying them. This is done until 50 percent of the total supply is returned to the exchange. As you can see, these are quite simple actions if someone has been moving in the crypto market for some time and is studying the subject.

Transactions related to buying back native tokens are publicly announced on the blockchain, so you can be sure that you will not miss such information. The clients of the exchange must therefore be vigilant to know when this will happen. The first time tokens were burned in 2017. Over 900,000 native tokens were destroyed then.

Some people do not fully understand the whole process. However, burning tokens has its advantages, especially for stock exchanges, because they can do so:

• attract new clients,
• increase the value of tokens.

Token burning involves the irreversible removal of units of a particular cryptocurrency from circulation, that is, reducing its total supply. In the example I will use the Binance exchange

Binance burn BNB within a certain time unit - every quarter. To do this, it uses a function written in a smart contract called burn. The BNB burn is done every quarter until 50% of the total BNB supply which is 200,000,000 BNBs is irretrievably destroyed - which in other words means burning as much as 100,000,000 BNBs.

The number of BNB units that are incinerated depends on the volume of trading done on the exchange during the assumed 3 months. Thus, after each quarter, Binance burns the corresponding amount of BNB in relation to the trading volume achieved by the exchange.

Burning coins in cryptocurrencies means sending some coins of your native cryptocurrency or other currency to a public address from which you can never spend those specific coins because the private keys of such an address are unreachable. This public address should be available on the blockchain so that anyone can view it. transactions. The whole process is done by sending some of the coins to the "eater address", which is often referred to as "black hole", private keys to this address are not available to anyone. Except the return lines to the 'eater' address are not recoverable and cannot be reused. These coins are thus withdrawn from circulation and are publicly registered and verified on the blockchain. There are few reasons why burning coins is a good idea. For example, a larger and more effective consensus mechanism. This applies to coins that adopt Proof-of-Burn (POB) as a consensus mechanism. POB is a unique way to buy consensus in a distributed network, requiring participants, miners and users to burn some coins. Reducing supply should (but not always), but increasing demand is the so-called deflation system.

This is nothing more than getting rid of a certain amount of cryptocurrencies completely from circulation.
Most often such actions are carried out by the creators themselves. These are not accidental decisions, one can even say that they are frequent practices, and the creators gain certain benefits from such actions.

When the tokens are burned, we can cause deflation, which at the same time will significantly increase the overall value for the actual cryptocurrency.

Larger players on the  market do not have to go for this type of treatment, but smaller platforms, must control the flow of virtual currency in such a way as to always earn on it.

This is not in any way a practical currency denomination, so it cannot be compared in any way, at least not as literally as we would like it to. Those dealing with cryptocurrencies are not always really aware of how this process actually works in practical life.

The token burning procedure itself makes the currency that is being burned cannot be used in the future anymore.