To find out about meme coin, you will often hear the term “burn token”. This is considered an important strategy, promising to increase the value for copper coin. However, mechanism burn token meme coin how it works and whether it really as effective as the rumors? This article will explain in detail this mechanism, from the concept, the aim of the impact of the fact that investors need to understand.
Burning token is and what it works how
Burning token is and what it works how
Basically, the burn token (token burning) is the process of permanently remove a certain amount of token out of the supply in circulation. Imagine it like a company buy back its own shares and then get them go, for the remaining shares become more valuable. In the crypto world, mechanism burn token meme coin be done by sending them to an address for burn (burn address).
Address for gas is a special wallets that no one has the private keys (private key) to visit. Once the token has been sent here, they will be locked forever and can never be used or traded back. Transactions burning this to be recorded publicly on the blockchain, so anyone can check and verify.
Why the project meme coin burning token
Why the project meme coin burning token
The project meme coin, which often have the total supply original extra large muscle use, the burn token as a strategic tool with many different purposes. This is one of the important activities directly affect the values and beliefs of the community.
- Create scarcity: This is the most important reason. According to the law of supply and demand, when supply decreases while demand hold or increase in value of assets tends to increase. The burn token create a model of deflation, making each copper token remaining becomes more and more scarce.
- Increase the value for the holding: When the total supply is reduced, each token rest will occupy a larger proportion of the overall project. This theoretically will increase the value for the person holding the token, a strategy that efforts of the Shiba Inu has clearly shown.
- Effect marketing and create trust: The notice of the burning of a large amount of token often create excitement in the community, attracting the attention of new investors.
The form of burning tokens today's most popular
The form of burning tokens today's most popular
There are many ways to the project made the burning token, but the most common are two main forms. Each form has approach and different impacts to the supply of a meme coin.
- Burning crafts (Manual Burn): The development team will actively burn a large amount of token at the critical moment. For example, when the project launches, or reach a certain milestone. Service gas 41% of the total supply Shiba Inu's Vitalik Buterin is one the most famous example of this form.
- Burn automatically via transaction fees (Automatic Burn): This is a mechanism built into the smart contract of the token. Every time a transaction takes place, a small percentage of the fee will automatically send to wallet burn. This mechanism is popular in the projects in the ecosystem Solana, creating the decrease in the continuous and sustainable over time.
The actual impact of the burning of token there as expected
The actual impact of the burning of token there as expected
Although in theory, the burn token seems very positive, the actual impact of it is not always as expected. A notification burn token is well-planned, can create a price increase short-term due to speculation, but the long-term effect depends on the core elements of the project.
However, investors need to be alert to the face left and myth downloads:
- Burning token meaningless if there is no demand: If no one wants to buy or use token, the decrease in supply will have no impact on prices. The actual demand is the determining factor.
- Tricks marketing: A number of projects abuse the burn token as a trick to hide the weakness in technology or teen-oriented development, only to create news.
- Supply original too large: With the project there are millions of billions tokens, and the burning of several trillion token may sound big, but in fact is just a drop in the ocean and not greatly affect the total supply.
Investors should assess the mechanism burn token how
Investors should assess the mechanism burn token how
To not fall into the trap of the promises, investors need to have a look critically and know how to evaluate a mechanism burn token. This helps to distinguish between a strategy that has real value and a trick marketing alone.
- Check transaction gas: Always ask for proof of authentication. The transaction must be made public on a journey to explore blockchain and the recipient address must be an address burning was recognized.
- Consider the context of the overall: Burning token is only one factor. Ask the project also has something else, like community strength, route clear development or practical application.
- Evaluate the rate of burning: Let's calculate the amount of token is burning accounted for how many percent of the total supply. A rate of burning significant new can create an impact on the value.
- Learn about tokenomics: Studying how the token is allocated. If the development team holds too much, they can sell out and neutralize the effect of the burning token.
Mechanism burn token is a powerful tool in the arsenal of marketing of the project meme coin, helping to create the story of the scarce and long-term commitment. However, it is not a miracle. A project with no platform, no community and no real demand, the burn token also indicative form. Investors need to look beyond the notification burn token and comprehensive review of project. To update the knowledge in the other deep, please visit Blog Meme Coin.
