How Does the Concept of ‘Token Burn’ Affect the Circulating Supply and Value Proposition?
A token burn is the permanent removal of tokens from circulation by sending them to an unspendable address. This action reduces the total circulating supply of the token.
By reducing supply, a burn can create deflationary pressure, which, assuming demand remains constant or increases, is intended to positively impact the token's price and value proposition.
Glossar
Economic Rationale
Valuation ⎊ Economic rationale within cryptocurrency, options, and derivatives centers on establishing a justifiable price reflecting inherent risk and potential return, diverging from traditional asset valuation due to novel characteristics like network effects and protocol governance.
Total Circulating Supply
Distribution ⎊ Total Circulating Supply within cryptocurrency represents the quantity of tokens that are publicly available for trading and transfer, excluding those held in reserves or locked by project teams.
Burn
Destruction ⎊ The process wherein cryptocurrency tokens are permanently removed from circulation by sending them to an unrecoverable address, effectively reducing the total supply.
Token Burn
Process ⎊ A Token Burn is the intentional, cryptographic destruction of a quantity of digital assets, executed by sending them to a publicly verifiable, non-recoverable address on the blockchain.