Cryptocurrency burning: What does it mean, and why it is done?
Cryptocurrency might have been going through a rough phase in 2022, but still, the interest in exploring cryptocurrency topics among crypto enthusiasts has not waned yet. Apart from showing eagerness to know about the price prediction of cryptocurrencies for upcoming years, there are other topics like how to create a Shiba Inu wallet, or Shiba Inu coin burn schedule 2022. For a novice crypto explorer, it would be a curiosity for him to what does this burning schedule of the crypto mean. In short, what does cryptocurrency burning mean, and why there is even a need for it? To know the answer stay abreast with the article till the end.
Cryptocurrency burning: Why does this mean, and why there is a need for it?
As the name suggests, cryptocurrency burning can be understood as a procedure to burn the tokens or simply saying removing them from circulation. This causes a decrease in the number of coins that are in use. After that tokens are sent to a wallet address that can only find its use for receiving the coins, not for transactions. There can be no longer use of tokens since the wallet is exterior to the network. In other words, wallet addresses that are being used for burning crypto are also known as ‘burner’ or ‘eater’ addresses.
What is a wallet address?
While discussing cryptocurrency burning, it is important to understand the wallet address. It follows when an address is given to the users of cryptocurrency for sending and receiving the coins. The address can be considered as your usual email address. This means it follows somewhat similar activity like sending and receiving emails from the email address from any place where you have access to it. A cryptocurrency address is the same as it, the address is identified as yours by the cryptocurrency network which is then used for transactions. And this is what is called a wallet address.
Burning of cryptocurrency
Coming back to the burning of cryptocurrency, it is a process when a coin is sent to a wallet address that cannot be used for transactions other than receiving the coins. As has been briefly mentioned above, these addresses are also known by other names like burner or eater. Cryptocurrency wallets comprise private keys that let tokens access stored in them. But contrary to it, there is no private key in the case of burner addresses. So it is a clear indication that your tokens are no more forever.
A major reason behind crypto burning
There is one major reason behind the burning of cryptocurrency. This is to ward off the possibility of unfair benefits for early adopters. The system of PoB (Proof-of-burn) has executed a tool that encourages the periodic burning of crypto coins in maintaining the balance between the new users and early mining adopters. Now there is a question that arises, which is who are the ones behind the burning of cryptocurrency tokens? The answer is developers. This led to a decrease in the supply that theoretically leads to a price rise which proves a big advantage for the investors.