How Are Token Burning Mechanisms Used to Manage Treasury Token Supply?
Token burning permanently removes tokens from circulation by sending them to an inaccessible 'burn' address. DAOs use this mechanism to reduce the total supply, which is a deflationary measure designed to increase the scarcity and potential value of the remaining tokens.
This can be funded by a portion of protocol fees or by burning treasury-held tokens, directly managing the treasury's own token holdings and mitigating inflation.
Glossar
Burning Tokens
Action ⎊ Burning tokens is the deliberate, irreversible removal of a quantity of cryptocurrency tokens from the circulating supply by sending them to an inaccessible wallet address, often referred to as an "eater address." This action is executed via a specific smart contract function, permanently removing the tokens from the total market capitalization calculation.
Token Burning Mechanisms
Deflation ⎊ Token Burning Mechanisms are programmatic features within a cryptocurrency protocol designed to permanently remove a quantity of the native asset from the circulating supply, creating a Deflationary pressure on the token's total outstanding amount.
Token Burning
Burn ⎊ The deliberate and permanent reduction of tokens within a cryptocurrency ecosystem represents a mechanism designed to influence supply dynamics and potentially enhance the value of remaining tokens.
Burning
Destruction ⎊ ⎊ In cryptocurrency, options, and derivatives, burning refers to the permanent removal of tokens from circulation, effectively reducing total supply.