You are currently viewing 𝙒  by Naomi Ndukwe |  Coinmonks |  Oct, 2022

𝙒 by Naomi Ndukwe | Coinmonks | Oct, 2022

𝙒

I don’t want to stop the fire, but something is burning badly. Numerous of the items are eliminated by the enormous fire burning them!

Still not asking for assistance because I’m ok with this.

What is burning, and why am I happy doing this risky thing?

Welcome to the #cryptocrushwednesday episode for this week!

We’ll go into the concept of burning cryptocurrency this week. You probably picture a young man burning Bitcoin, Ethereum, Solana, and other digital currencies while holding a gallon of diesel. What a funny idea!

There is much more to the term β€œburning” in cryptocurrency than just fire and combustion.

Ever ponder how cryptocurrencies manage to retain their worth and value? Why do popular cryptocurrencies’ prices continue to rise as their value rises? It is not magic; Rather, it is a deliberate scheme.

Here is a little peek at what we will be learning today.

𝙋 expression expression

  1. Definition of cryptocurrency burning
  2. How is a cryptocurrency burnt?
  3. What type of consensus mechanism is used when a coin or token is burnt?
  4. Is burning cryptocurrency risky?
  5. Importance of cryptocurrency burning
  6. Examples of cryptocurrencies adopting this strategy
  7. Conclusion

Let’s explore!

𝙒 𝙒 𝙩 𝙄 𝙄 𝘾

Burning cryptocurrencies involves lowering the number of coins or tokens from the total supply.

By lowering the amount of a cryptocurrency in circulation, burning it raises or increases the value of a coin or token.

Some cryptocurrency burns occur without the coin’s users even knowing it, while others are planned and intentional.

𝙃 ?

The process of burning has a crucial impact on blockchain users. A typical cryptocurrency address may send and receive coins in a wallet, but what if it only receives coins?

When burning cryptocurrency, a unique wallet address called β€œburner” or β€œeater” is utilized. This wallet address only allows receiving cryptocurrency, not sending it. Although the initial purpose of a wallet address was to store cryptocurrency, this wallet address aims to change that. Traders use private keys as a security technique to protect their funds and wallet. The received cryptocurrencies cannot be accessed or exchanged since the burner wallet address lacks a private key. The wallet is more like a trash can!

𝙒 𝙒 verse .

In this procedure, a unique consensus mechanism known as Proof Of Burn (PoB) is employed. The blockchain network established this consensus method to enable network participants to validate and approve transactions. The fact that this consensus technique permits miners to burn tokens in addition to validating transactions makes it similar to the Proof Of Work mechanism. Depending on the number of currencies add burned, miners are permitted to blocks to a chain after burning a coin or token.

No, don’t feel bad for the cryptocurrency; we’re assisting it and it isn’t a horrible scheme. Let’s first discuss the risks associated with burning cryptocurrencies before I go on to explain the advantages.

𝙄 𝙄

Although burning cryptocurrencies has several benefits, it may cause price fluctuations due to an adoption rate, trading level, or sentiment. Now let’s learn the advantages of this.

𝙄𝙒π™₯ 𝙩 π™˜

  1. It decreases the number of coins in use, thus raising its value. The law of supply and demand is well known to all. A commodity does not become scarce and eventually loses value if it is offered in abundance.
  2. Burning uses the Proof Of Burn(POB) consensus mechanism to strike a balance between old and new miners in the blockchain network.
  3. The price of cryptocurrency rises as a result of burning.

𝘾 𝙃 𝙃

  1. Ethereum
  2. SHIB INU
  3. LUNA and more

𝘾

A key scheme in maintaining the value of cryptocurrencies present on the blockchain network is burning. It raises a coin’s value by lowering the number of coins that are available on the blockchain network. Would it make you feel good to be one of just five people in the world to own a certain piece of designer clothing? It’s worth the praise and money. The same is true of cryptocurrencies, which are limited in supply.

Did you gain value from this article? See you again soon!

PC: Dreamstime.com

New to trading? Try crypto trading bots or copy trading

Leave a Reply