Burning crypto refers to the one-way transmission of the crypto once you send the crypto into the wallet now you can never receive the crypto back. Furthermore, It is the process used to decrease circulating supply. Today’s discussion is all about crypto burning, so let’s understand what it is!
What Is Burning Crypto?
Burning crypto means removing tokens from the available circulating supply to increase the price of cryptocurrencies. Furthermore, it is the process in which we send crypto into a wallet that has only a public key and it doesn’t have a private key, which means we can only send crypto into it but we can never receive or revert the transactions once it has been done.
Let’s understand it with an example, for instance, by using a crypto wallet MetaMask we can send or receive crypto because we have the public and private keys of it and we can fully own it. But what if we just have the public key of the wallet and don’t have a private key? In that way, we can only send the crypto to that specific wallet but can never receive it back.
What Is Proof of Burn (POB) Consensus
Proof of Burn (POB) is a consensus algorithm used in the process of burning crypto. It validates the transaction with minimal power consumption and it is often called Proof of Work (POW).
What Is the Purpose Behind Burning Crypto?
The major purpose behind the burning of crypto is to decrease the value of the circulating supply to control inflation. Furthermore, it helps to increase the price of cryptocurrencies and it ultimately helps investors. Burning crypto helps to adequate the cryptocurrencies and control the oversupply. Generally, oversupply of anything affects the overall market price.
Here are the listed few advantages of Burning Crypto:
- Decrease in circulating supply chain
- Increase demand value
- Increase Price
- Control Inflation
- Control the oversupply
Here are the listed few disadvantages of Burning Crypto:
- It may not increase in price sometimes
- It may cause scarcity
Burning crypto means removing the tokens from the circulating supply to control inflation, and oversupply so that the market price could be managed. But sometimes it goes reversely, means no increment in the market price of crypto and may cause scarcity.