Crypto Tip: What is Coin ‘burning’?
In the crypto world, sometimes your dictionary will count for nothing. It appears that on every market cycle, crypto traders have new ways of describing events. Crypto-specific terms like HODLing, FOMO and others distinguish the system.
Among those is the term ‘burning’. Well, a newbie may take the phrase quite literally, and why not? In reality, he/she won't have deviated much from the true meaning, after all.
In the crypto world, the word ‘burn’ means deliberately destroying or removing a token from circulation. And since cryptocurrencies are tokens that exist purely in the digital realm, the only way to ‘burn’ or purge the coin from circulation is to make the coin inaccessible.
Often, crypto and blockchain projects ‘burn’ a token by sending them to a wallet whose private key can't be accessed or is unobtainable.
This means that come what may, the project's creators can't retrieve those coins and inject them back into circulation. The wallet is often described as an ‘eater’. It is visibly accessible, but the content is out of reach and can't be accessed.
Many crypto projects, especially with millions of coins/tokens in circulation, periodically ‘burn’ their tokens to reduce supply and increase scarcity.