What Is Token Burning and Why Do Projects Do It?

Token burning is the process of permanently removing cryptocurrency tokens from circulation. This is typically done by sending them to a special address called a burn address — a wallet with no known private key. Tokens sent to this address are unrecoverable and considered destroyed.

Burning tokens is a widely used strategy in the crypto space to reduce supply, fight inflation, increase scarcity, or signal long-term commitment to a project. It's comparable to a stock buyback — but executed transparently on a public blockchain.

Why Do Projects Burn Tokens?

There are several economic and strategic reasons behind token burns. The most common motives include:

• Reducing supply: Fewer tokens in circulation may lead to higher prices if demand stays the same or increases.
• Fighting inflation: Projects with high emission rates use burning to offset token inflation and protect long-term value.
• Rewarding holders: By reducing supply, each remaining token represents a larger share — indirectly benefiting users.
• Building trust: Scheduled burns demonstrate long-term commitment and discourage short-term speculation.

How Does Burning Technically Work?

To burn tokens, they are sent to a special address that has no private key — meaning no one can access or spend the tokens ever again. These addresses are publicly viewable and easily verified on block explorers.

Example of a burn address (Ethereum):

0x000000000000000000000000000000000000dEaD

Tokens sent to this address are considered permanently removed from the total supply — and the burning process is fully transparent.

Real-World Examples

• Binance Coin (BNB): Binance conducts quarterly automated burns based on trading volume. Over 100 million BNB have been burned to date.
• Shiba Inu (SHIB): The SHIB community created burn portals to voluntarily remove tokens from circulation.
• Ethereum: Since upgrade EIP-1559, a portion of ETH is automatically burned during each transaction — making ETH potentially deflationary over time.

Some projects tie token burns to activity — such as burning a percentage of platform fees to align tokenomics with network usage.

Risks and Criticism

• Marketing gimmicks: Some projects use burning purely as hype without any real utility or economic benefit.
• Ineffective without demand: Burning tokens doesn’t add value unless there's actual use or demand for the token.
• Lack of transparency: If burns are infrequent or poorly communicated, they may create more confusion than trust.

Floin Insight

At Floin, we view token burning as one tool — not a magic solution. We only consider burning when it serves a clear strategic purpose, is transparently communicated, and verifiable on-chain.

Our long-term goal is to create a balanced and sustainable token economy that avoids artificial scarcity and builds real value for users. When used responsibly, burning can support that vision — but it’s only one part of a much bigger picture.