What is cryptocurrency burning?

Cryptocurrency burning is the process in which users can remove tokens (also called coins) from circulation, which reduces the number of coins in use. The tokens are sent to a wallet address that cannot be used for transactions other than receiving the coins. The wallet is outside the network, and the tokens can no longer be used.

Why do cryptocurrency developers burn tokens?

By reducing the number of coins in supply, the entities doing the burning hope to make the tokens more valuable and less attainable—working to control the coin supply and maintain or increase the value of their own holdings. Some cryptocurrency developers intentionally burn tokens to accomplish these tasks.

How do proof-of-burn cryptocurrencies work?

The more tokens they burn, the more they can mine. In return, participants receive rewards in the cryptocurrency they're mining. Some proof-of-burn cryptocurrencies require that miners burn the same currency that they're mining.

What are the benefits of burning crypto coins?

• Burning coins can help control inflation for a particular crypto, e.g. stablecoins. • Using proof-of-burn as a consensus mechanism is a low-energy way to validate transactions and create new coins, while keeping the supply in balance.