Token burning is the process of permanently removing tokens from circulation. This is usually done by sending them to a special address that no one holds the keys to, often called a burn address, so the tokens can never be moved or used again.
Projects burn tokens for different reasons. Reducing the total supply is a common one, sometimes described as a way to affect scarcity. Some protocols burn a portion of fees automatically as part of how they are designed, while others do occasional one-off burns.
It is important not to read too much into a burn on its own. Reducing supply does not automatically raise a token value, since price depends on many factors including demand. This entry explains what burning is; it is not a suggestion that a burn makes any token a good or bad choice.
Frequently Asked Questions
Where do burned tokens go?
They are sent to a burn address that no one holds the keys to. Because the tokens can never be moved again, they are effectively removed from circulation permanently.
Does burning tokens make the price go up?
Not automatically. Burning reduces supply, but price depends on many factors, especially demand. A burn on its own does not guarantee any change in value.
