Coin burning process; is the permanent removal of coins from circulation. All burns have a transaction history on the block to which the coins belong, which provides transparency to investors. Its main purpose is to reduce the total supply in the market. It is a transaction that happens only in the crypto money market. There can be no similar process in the money market because different strategies are applied to reduce the total supply in the money market. Coin burning is a function of smart contracts.
How to Burn Coins?
An investor can request to burn coins and specify as many coins as he wants to burn in his account. Once confirmed, the coin burning takes place. Burned coins can never be recovered. It can be the request of the investor as well as encouraged by the institutions. In this way, coin burning takes place collectively. As a result of this burning process, the market balance is ensured and the amount of coins in circulation is controlled. For example, BNB coin is regularly organized by the producer company to burn coins. It does this as much as half the amount of BNB will accomplish each quarter. The amount of BNB to be burned is determined according to the number of transactions made in the last 3 months. With this coin burning activity, the manufacturer meets the necessary price targets and provides balance in the market. In January 2019, the BNB coin burning event was again organized, 10 million BNB coins were burned and the total supply was reduced by 5.41%.
Another example is KLV, a universal platform for storing and transferring cryptocurrencies, which conducted a KFI mining event. Within the framework of this event, $ 77 million of KLV tokens were burned. All KLV tokens were burned and went out of circulation. KLV owners welcomed this event very nicely and KFI developed 3 devices. The most important of these is KLEVER SWAP. KLEVER SWAP has announced that it will burn 100% of its transaction fees on a daily basis. The main goal of KLV is to balance the market against constantly emerging coins and tokens and to provide profitable investments to its supporters.
What are the Benefits of Coin Burning?
Its most important feature is to reduce the total supply. Thanks to this, deflation is created and its price is increased. Supply-demand balance is ensured in the market because the value of a cone whose total supply is not limited cannot increase continuously, so the balance is created in the market with the coin burning process and a competitive environment is created with the coins whose supply is limited. For example, there are 1000 coins on the market and the total value of these coins is $ 1000. In a situation where 1 coin is equal to 1 dollar, if we request to burn 250 coins, the value of 1 coin will be $ 1.33 and as a result of the burning process, a price balance has been formed and the value of the coin has increased.
While projects benefit from coin burning, token holders of that coin also benefit positively from this burning process. It increases security, speeds up transactions and this transaction speed is not deducted from the investor as a commission. This gives confidence to the investor. For example, RIPPLE . Coin burning is also carried out for mining. The person or institution that will do mining burns the coins in his hand, presents the document we call proof of combustion and qualifies for mining.
