The economic thesis proves that when the supply is low, the demand increases, and when supply is high, the demand decreases. In order to checkmate inflationary effects, the supply would have to be reduced. For this reason, the circulating supply of cryptocurrencies like BNB (Binance coin), TRX (Tron), etc. decrease by a certain percentage on a periodic basis.
Reasons for Burning Tokens
Primarily, the purpose behind burning tokens is to control the prices of the token concerned in the marketplace. Edul Patel, CEO and co-founder of Mudrex said,
“it drives the coin price higher. It makes existing investors pretty happy as the value of their investments move northwards”.
Decreasing the amount of tokens in circulation helps provide a deflationary sequel making them scarce and possibly leading to an upward price surge. Patel of Mudrex sums it up as,
“miners of certain cryptocurrencies such as Bitcoin also become happy as the value of reward for their labor would have now increased”
Benefit of Burning Tokens
The most rewarding feature of token burns is the almost certain increase in the token’s value. Tokens are sporadically burnt to spur investors to hold on to them with the expectation that they would become more valuable with decreased circulating supply. Token burns are becoming very popular even among the most widely adopted cryptocurrencies. For instance, a look at the XRP price chart shows that from November 2019 to August 2020, the price went from $0.28 to $0.31. The burning of coins kept the steady value of the token and ensured a long-term price surge.
Here is a comprehensive list of some cryptocurrencies that have embraced the concept.
ZUNA Coin
This cryptocurrency is built on the fast-rising Binance smartchain. It is a deflationary community DeFi token. It is said to have a circulating supply of 400 trillion coins, some of which will be burnt over time. 5% of any transaction is to be shared to all token holders as a way of rewarding its investors.
Binance Coin (BNB)
Launched in the mid-year of 2017, BNB is a native asset of Binance chain. It was developed by Binance, the largest cryptocurrency exchange in terms of trading volume. It has a maximum supply of over 200,000,000 BNB coins of which about 168,137,036 are currently in circulation as of September 2021.
It is a deflationary token; therefore, it implements the buy-back and burn system which is the burning of a part of the BNB coins every quarter of the year with investors purchasing it with a 15-25% profit. The coins are burnt every quarter with the aim of halving the supply. The 16th quarter burn was carried out on July 18th, 2021.
TRON (TRX)
TRX is the native asset of the TRON ecosystem released on the 25th of July 2018 by a Singapore non-profit organization. It metamorphosed from inflationary to deflationary in April 2021. This was attained with the decrease of total supply from 1,678,790,175 to 101,673,029,723.
August 5, 2021, saw the price at $0.0705, pegging its market capital at $4.6 billion. It later reached an all-time high ($0.2180) on the same day.
TERRA (LUNA)
Founded in January 2018 by Daniel Shin and Do Kwon, LUNA has a maximum supply of 1 billion. LUNA tokens are burned till the balanced supply level is attained. The supply will decrease as the demand for terra stablecoin increases.
