One of the latest updates to the London Hard Fork has been crypto burning. It’s become the most discussed activity amongst crypto buyers and sellers today. But what exactly is crypto burning? Let’s find out.
Where coins are sent into the black hole
No, we’re not talking about outer space, but more like cyberspace.
Crypto burning is the process of permanently destroying certain cryptocurrencies to make them completely unusable for trade. The miner of the crypto burns by sending the coins to a specific wallet that does not have an access key or any other way to access it. Essentially, these coins are sent to a black hole (of sorts), where there’s no way to take them out again, ever.
A move to protect investors’ interests
Crypto burning usually isn’t done to popular and most-bought currencies such as bitcoin or ether. Rather, they’re being used on lesser-known altcoins in order to prevent an overproduction of these coins.
Lesser-used tokens sometimes have the tendency of giving investors better pay-offs because of less competition, but steady growth. In comparison, a large amount of trading done in coins like ether and bitcoin prevent investors from making excessively high profits. Through coin burning, investors’ interests can be protected by ensuring everyone is on a level playing field.
Improving crypto value, one burn at a time
Crypto burning also serves to improve the value of the currency. When a certain number of coins are taken off the roster, there is a reduction in the availability/supply of the coins. This pushes up the prices of the existing coins, as demand continues to be consistent.
This northward movement of crypto prices is essential to prevent the market from becoming too stable and not generating any growth for investors.