One of the crucial steps in the development of crypto projects is token burning. Let's break down what this means.
Token burning is the process of permanently removing coins from circulation. Tokens are sent to an inaccessible wallet, making them unavailable forever.
Why Burn Cryptocurrency?
- Deflation: Burning tokens helps maintain their value by reducing the total supply in circulation.
- Value Inflation: Some projects burn tokens to temporarily increase their value.
- Unwanted Tokens: After unsuccessful token sales, the remaining tokens are often burned.
- Creating New Cryptocurrency: During a hard fork, old tokens become incompatible and are subject to liquidation.
- User Errors: Carelessness in sending tokens can lead to their loss.
Methods of Token Burning:
- Sending to a "null contract": When tokens are sent to a special address designated for burning, the total supply does not decrease.
- Burning tokens in a minter: In this case, the total supply decreases.
- Special smart contracts: Allowing to specify the number of tokens to be destroyed simplifies the burning.
- Hard fork: Rewriting the blockchain code and burning a part of the coins.
- Fees: Some cryptocurrencies burn a part of the transaction fees.
- Proof of Burn (PoB): A consensual algorithm where miners burn coins to gain the right to mine new blocks.
Token burning is a common practice to maintain the value of tokens and prevent inflation. However, it does not always guarantee a price increase, and projects should approach this process carefully.
How is Token Burning Implemented at Spintria?
All partner adult services, when integrating products from our ecosystem, are required to burn 25% of the $SP they receive as payment for content on a monthly basis. The most transparent and effective method for burning $SP is through the minter, reducing the total supply. The final supply after all burnings will be halved to 444,444,444 $SP.
In the near future, we will implement burning through special smart contracts that automatically reduce the total number of issued tokens, increasing the value of the remaining ones. As part of this strategy, we regularly negotiate with partners to burn a portion of the tokens.
The process of burning $SP can be conveniently monitored on the blockchain.
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