Why do developers burn their tokens?
In the cryptocurrency sector, there is such a thing as burning tokens. Sometimes coins (crypto or fiat) experience inflation, and to combat it developers burn their tokens. The creators of digital coins destroy part of the emission in order to limit the supply, thereby increasing the value of the asset.
All coin burns are recorded on the blockchain as transactions, so anyone can verify that the coins have indeed been permanently withdrawn. In fact, the creators of the project send tokens to a wallet address that can only receive coins. These addresses are also called “burner” addresses, so tokens simply disappear, no one will ever get access to them.
When creating a new cryptocurrency, developers calculate a mathematical model that determines the value of an asset. They initially plan the procedures of burning tokens at the creation stage. So the holders of this cryptocurrency do not need to worry that their tokens will be destroyed, as the developers burn the digital coins that belong to them.
A good example of a token burn is Binance Coin. In April, such a procedure was implemented for the 19th time. In total, 1.8 million BNB, worth $756 million, were destroyed.
BNB tokens will continue to be burned quarterly until 50% of the supply is burned.
An alternative to burning tokens is Proof-of-Work (PoW) consensus, which also helps eliminate the overemission of new coins, namely, the periodic reduction in the reward to miners for a found block just keeps the inflation rate at the target.