What is coin burn?
Being in the world of cryptocurrencies, you have probably come across many terms that are not understandable to you. Some occur frequently and others rarely. To those that should be known, definitely add the term "COIN BURN". It is a simple and logical term and you may need to know it.
That is, "burning coins" - it is nothing else than the irretrievable removal of units of a given cryptocurrency / token. In practice, it is nothing more than reducing its total supply. Burning coins can, for example, be written in a smart contract and appear, for example, periodically to prevent too much emission of a given cryptocurrency. Limited supply allows you to keep your digital currency in check (see the term inflation), make it unique and add value. It is usually a well-thought-out and sensible mechanism described in the white paper. It has nothing to do with the loss of tokens by their owners. So worry, it's not burning your tokens kept in your wallet :)
Smoking is also beneficial for the owners of exchanges because, in addition to increasing the value of tokens, it allows for obtaining new users, i.e. exchange clients.
What are the main reasons for coin burn? - more effective consensus mechanism, this applies to coins that accept Proof-of-Burn (POB) and increasing the value of the token (the law of supply and demand).
What does burning tokens look like in practice?
- Each BNB owner calls the burn function, thereby letting the smart contract know that he wants to burn a certain amount of BNB units.
- The contract then verifies that the owner has the amount of BNB in their portfolio and that the number of units they indicated is positive, as only a positive amount can be burned.
- If the caller does not have enough BNB units, or if the given number is invalid (such as 0 or -5), the burn function will not be executed.
- However, if it has enough to carry out the incineration, the amount of BNB it indicates will be deducted from its portfolio. At this point, the total BNB supply is updated (reduced) and the indicated BNB units are burned.
Transactions related to the repurchase of native tokens are announced publicly on the blockchain network. Therefore, do not worry, we cannot physically miss this information.
However, all exchange users must be vigilant. It is good to know when such a situation will take place. It is dated that the tolens were burned for the first time in 2017. Over 900,000 native tokens were destroyed then.
Remember! Cryptocurrency units subjected to the Coin Burn process can no longer be recovered. They are irreversibly destroyed. This process is automatic and you, as the owner, have no influence on it.
It should be assumed that the coin burn phenomenon will be more and more commonly used and will gain popularity. However, there are no plans or statistics about specific numbers. Nevertheless, for traders, such currencies are a clear signal of investment opportunities, trends and finally profits
(the text comes from the private blog ZaHajsZKryptoBaluj)