In this article, you will see what a token burn (or coin burn) actually means. Perhaps you have seen someone talking about it online — on social media, Telegram groups, or forums — and you are curious to learn more.
In fact, the term token burns gives away the definition:
Token burn simple means destorying the tokens (or coins). This reduces the total supply of the coin.
It is obvious when you think about it. However, when you dig deeper, you will see when and why a token is burned.
There are two reasons here:
First, tokens are burned because they are unsold. For example, let us say there is an ICO with a million tokens reserved in the public sale. If only .9 million tokens are purchased, the rest of them are unutilized. Therefore these unsold — and unutilized tokens — are burned and destroyed.
Second, tokens are burned to reduce the supply (and keep your investors happy). For example, Binance tokens (BNB) are burned regularly. This in turn reduces the circulating supply of the coin.
And when the circulating supply is reduced? Demand for the coin increases. In other words, value of the token increases.
Based on these two examples, you can also define a token burn as a deflationary measure helping in increasing the token value and retaining the confidence of the investors.
Remember that once the tokens are burned, they are not accessible to anyone. The owner, developers, contract creators, and the investors cannot get these tokens back.
Recently, Peculium burned over 5.7 billion tokens (one of the biggest token burn in the blockchain industry) thereby leaving the circulating supply to a billion tokens.
Even Tron, one of the most popular cryptocurrency, will be burning coins every time a new digital asset is created on its mainnet platform (in the future).
Right now, Morph Network is burning tokens as they were not purchased during the main ICO sale.
All these examples should give you a fair idea of why tokens are burned. In short, tokens are burned to increase the token value, to stay in the news, to protect the early investors, and to create coin scarcity.