What Is Token Burning and Why Do Projects Do It?

Token burning is a method used by cryptocurrency projects to permanently remove tokens from circulation. While it might sound destructive, it’s actually a strategic move used to influence supply, value, and long-term utility.

In this article, we’ll explain what token burning is, how it works, and why it’s often seen as a tool for enhancing token economics.

What is token burning?

Token burning refers to the permanent removal of tokens from the total supply. This is done by sending them to a “burn address” — a wallet that no one has access to. Once tokens are sent there, they are unrecoverable and effectively destroyed.

This process is transparent and verifiable, as all transactions are recorded on the blockchain.

Why do crypto projects burn tokens?

• Reduce supply: Like stock buybacks, burning reduces the circulating supply — which can increase scarcity and support value.
• Incentivize holders: Some projects burn tokens as a reward mechanism, sharing profits or transaction fees with holders.
• Regulate inflation: Regular token burns can offset inflation caused by token emissions (e.g. staking rewards).
• Correct over-issuance: If too many tokens were created early on, burning helps rebalance the economy.

How is burning implemented?

Burns can happen manually (by project teams) or automatically via smart contracts — for example, by sending a portion of every transaction to a burn address. The rules and frequency are often defined in the project’s whitepaper or governance proposals.

Does Floin support tokens with burn mechanisms?

Yes — some tokens available on Floin, including FLTK, may implement burning mechanics to control supply and create long-term sustainability. Details vary by project and are outlined in their respective documentation.

As a user, understanding token burning helps you assess scarcity, potential value growth, and a token’s economic design.