The term coin burn or burning of coins is itself of the markets in cryptography, and it is with the purpose of removing a proportion of the total criptoactivos available in the ecosystem. This form will be permanently deleted from the cryptocurrencies in circulation. To do this they are sent to a public address where it can never be spent, because its key individuals may not be recovered. This public address is available to that may be reviewed by any user. Burning coins can be used to: Create new monedasDar rewards to the providers of monedasDestruir coins or tokens that were not sold after a sale ICO
How does the coin burn
For the occurrence of a burning of coins or tokens must comply with the following steps and in accordance with the order. The bearer of the cryptocurrencies activates the function burn-in to indicate that the amount of coins you want to burn.The contract verifies that the cardholder actually has the amount of coins that you want to burn in your wallet, and that the number is valid and the balance is in positive.The function will not run if the number you entered is not valid (between 0 and -5) or the balance is not enough.If you meet the above points, then the cryptocurrencies will be subtracted from the wallet of the carrier.Updates the total supply and the cryptocurrencies will be burned.The coins burned are to be destroyed without possibility of reversal once it is executed the function. We are not talking of a collapse of the currencies but the renders for the future. This is why they are placed on the public purse and unrecoverable. In addition it is visible to all nodes, but is frozen permanently, and its status will be published in the blockchain to be consulted by those who wish. Some projects burn tokens once you have completed your ICO removed the chips that were marketed in order to encourage other participants. Others, such as the case of Binance, do you burn on a quarterly basis after the purpose of alcazar burning 50% of all tokens BNB is built on its blockchain.
BNB, an example of burning coins
Binance periodically performs burning of coins by using a smart contract. Are feature is scheduled to be executed automatically every three months. On a quarterly basis burns the 50% of the coins circulating and this will continue until it reaches the amount of 100 million of BNB, as the total that will be issued will be 200 million from BNB.
Why burn cryptocurrencies
They are generally used to maintain a stable value and provide incentives to retailers to keep their criptoactivos, in addition to be an action that is deflationary. Among other reasons are: Firstly, to give greater value to the currency by reducing the existence.To correct errors as it did Tether when accidentally created USDT 5 billion, this forced them to burn them in order not to destabilize the 1:1 ratio with the USD.It can also be used to prevent transaction spam by adding a home security. So did Ripple to eliminate the incentives of system overload and for protection against DDoS. Other functions, although not the usual can be: Create a mechanism more reliable to add and verify transactions in the blockchain.As a consensus of evidence of burning of cryptocurrencies (PoB)To reduce the number of miners at a specific time.
As we have seen, the burning of coins has several functions within the ecosystem and will be determined by the specific scenario of the blockchain that will implement the strategy. The most common are to remove the coins that were not placed in the ICO and increase the value of the coins circulating within the ecosystem. The burning of coins or coin burn could be taken as a good practice, because it serves to guarantee the performance of the criptoactivo decently. The following two tabs change content below. Creative editor and trader of cryptocurrencies, currencies, fiat, and commodities.