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What's the meaning of BURN in crypto

What is the "burn" of a token? When to invest and how to take advantage of it.

'The "BURN" of tokens has become one of the most popular aspects of the digital currency industry.

What is Coin Burning?

Coin burning is the permanent removal of tokens from circulation. It is an internal action taken by the creator and management team of the cryptocurrency to withdraw a specific number of tokens from the market. These coins are permanently destroyed and this process is not reversible.

All cryptocurrencies can be burned. The decision to burn tokens is usually granted to the coin creators although sometimes, burning can be promoted by the community itself.

This mechanism is also adopted by famous cryptocurrencies such as Bitcoin and Ethereum.

One of the reasons that incentivizes cryptocurrency owners to enact burning is the resulting impact on supply and demand mechanisms in the cryptocurrency market. In fact, burning tokens reduces the supply of them. With the same demand, the price of the coin increases, creating a kind of deflationary effect. For this reason, this extraordinary operation always attracts many new investors.

Therefore, the coin creators have a great incentive to implement this type of operation, all the more so if they also own most of the tokens in circulation.

It is therefore important to note that in the latter case, however, the real beneficiaries of the burning are the creators and not the investors.

The latter will buy directly from the token creator at a premium price.

It should therefore be kept in mind that in the cryptocurrency market, as in all finance-related fields, business decisions are too often influenced by speculative rather than value-creating motives.

A shrewd investor must always know the token economics of the cryptocurrency in which he or she intends to invest in order to understand whether or not in fact, the transactions put in place create value for the company.

Many investors, particularly if novices, fail to understand the importance of the concept of "value" and blinded by the idea of getting easy returns, they end up suffering the "monetary illusion" that is, accounting for small gains quickly and large losses in the long run.


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