Crypto glossary
Token burn
A token burn permanently removes tokens from circulation by sending them to an address no one can spend from, reducing the total supply.
Burning works by transferring tokens to a so-called burn address, a wallet with no known private key, or by calling a contract function that destroys them outright. Because the transaction is recorded on the blockchain, anyone can verify how many tokens have been removed.
Projects burn tokens for different reasons. Some run scheduled buyback-and-burn programs funded by revenue, BNB being a well-known case. Others burn automatically as part of the protocol: since the London upgrade in August 2021, Ethereum destroys the base fee paid in every transaction, which offsets part of the new ETH issued to validators.
A burn reduces supply, but it does not guarantee a higher price. Its effect depends on demand, on how large the burn is relative to new issuance and on whether the burned tokens were ever likely to be sold.
Example
If a token has a supply of 1 billion and the team burns 50 million from its treasury, the supply drops to 950 million, so each remaining token represents about 5.3% more of the total.
Related terms
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