The Many Benefits of Coin Burn


Pandhita • 15 Des 2022

In the last article we've already explained about What is Coin Burning, What is Tokenomics, and the importance of both. Token burning is the process to which coin is purposely and permanently removed from the circulating supply. It is usually performed by the dev. Some companies burn token regularly, when others do so as an one off event. 


Coin burning is like an act of self sacrifice that occurs when a project burns a part of their cryptocurrency. The reason for doing this is usually to reduce inflation or supply and to increase demand, but it may also be done simply to control the tokenomics. When a project burns a part of their cryptocurrency, it is essentially giving it away to the eater address. Coin Burning can be a very difficult decision for a project to make. One project need to calculate the risk, pros, and cons of coin burning before executing the coin burn process. That's the beauty of coin burning. It makes project's economy more robust and safe. 


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Benefits of Coin Burn

Aside from that, did you know that other than for tokenomics purpose there are a lot of benefits that you can get from Coin Burning as an Investor? Coin burning not only benefits the developer but also the community and investor. In this article we'll explain about the benefits for coin burn for you guys as an investor.


1. Deflationary purposes. 

There's this thing called Deflationary Cryptocurrency, which means the total number of coins is constantly declining. This is an interesting economic model that might be worth trying out for certain projects or situations. A deflationary cryptocurrency is one in which the supply of coins will decrease over time. Therefore, the value of each coin will increase even in a scenario with consistent demand. On the other hand, different projects use unique deflation initiatives for specific purposes. A detailed understanding of deflationary cryptocurrencies is an essential requirement to learn the differences between inflationary and deflationary cryptocurrency alternatives on the market. One example of showcasing deflationary cryptocurrencies is Binance BNB. The crypto exchange destroys some of its original Binance Coins or BNBs to reduce supply every quarter.


2. Stablecoin PricePeg

Stablecoin is a crypto which value pegged to fiat currency with 1:1 ratio. Although the majority of stablecoins are secured with reserves, algorithmsic stablecoins employ incentives and maths to ensure their peg to fiat. Algorithmic Stablecoin is a cryptocurrency that's supported by automated procedures designed to keep a stablecoin's price by increasing or decreasing the supply. The goal was to develop a independent currency that was not in the end supported by a central issuer of assets such as that of the US government.The system varies between each of stablecoin. But in some algorithmic stablecoin use coin burn as a way to regulate their economy. For example in UST-LUNA case, to peg $UST, $LUNA token is burned to keep $UST value pegged 1:1. $LUNA is being used to absord UST volatility. When UST price is volatile, $LUNA token is burned thus reducing its supply and raise the price of $UST. $LUNA is being used as an anchor for $UST. These algorithms are programmed so that they automatically generate more stablecoin units or to destroy the existing ones in reaction to changes in demand and supply. When the stablecoin trades higher than its pegged price, more tokens are created , and the price decreases. If the stablecoin trades below the peg and more tokens are taken from circulation, and the price rises. A sibling token with fluctuating prices is often in the.


3. Correction 

Correction, this enable a project to correct a mistake. For example, Tether created $5B USDT by accident. These token had to be burn to proven and stabilizing the one on one peg with the US dollar.Another case is happening during an ICO. Some projects cannot sell all tokens during an ICO. Assets remaining in the company's account after the ICO are usually burned, which indicates that the project cares about the asset and the user. Coin burn is also beneficial when during cryptocurrency development. A blockchain product can be launched with some bugs and errors. One of the fastest ways to fix the problem is with coin burn. By using Coin Burn features, developer can correct bugs and erros they made in the Main Net. 


4. Incentivize Token Holders

As market grews higher and token holders increased. To keep holders In check some projects use coin burn as a way to incentivize their holders in order to make them want to hold their tokens. To achieve this, exchanges like Binance, KuCoin, Huobi burn token periodically. For example BNB Auto Burn. BNB auto-burn was introduced with the launch and change to Binance Chain as well as Binance Smart Chain into BNB Chain. According to Binance the auto-burn system was developed to increase its BNB token's value and to provide an affordable and secure long-term growth strategy in BNB. Thus will benefits token holders in the long run. 


5. Effective Consensus Mechanism

Effective consensus mechanism. The proof of burn mechanism, is a consensus algorithm implemented by blockchain network. It is used for validating transactions on the blockchain. The most valuable benefit of token burning, is the increase of value of the token, even only in the short term. Consensus Algorithms is an algorithm process that helps all the participants within the Blockchain network come to an mutual agreement regarding the current status of the ledger that is distributed. Consensus algorithms can help ensure confidence within the Blockchain network and create trust among unknown peers in a distributed computing system. It ensures that each new block put into Blockchain Blockchain is the only that is the only one approved by all nodes of the Blockchain.


There are many benefits that investor can get in the Coin Burn events. Not only developers that will benefits from these events. Coin burn will give benefits to all parties involved in the project. From developers, community, and investor. Coin burn will give more transparency to the project and will give make cryptocurrency evosystem and economy more stable. With coin burn projects like KunciCoin will become more transparent and give advantage edge for whole parties involved. 


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KunciCoin will burn 36B worth of $KUNCI or almost 90% of total supply. This is one of the biggest burning event in the history of cryptocurrency. With the coming of KunciCoin burning event, KunciCoin also launched campaign called #KunciCoinOnTorch. By burning these total supply KunciCoin project will become more transparency to the investor and community. With our vision of becoming top cryptocurrency projects in Indonesia, KunciCoin keep improving its project and vital core to become better and match expectations of investor. 


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