Burn

In simple terms

Burning crypto tokens means permanently destroying them so they can never be used again, like shredding cash. This reduces the total supply of tokens in existence.

Definition

Permanent removal of tokens from circulation.

In depth

Token burning is the process of sending cryptocurrency to a wallet address where the private keys are provably inaccessible or destroyed, effectively removing those tokens from the circulating supply permanently. Validators and nodes record these burn transactions on the blockchain, making them irreversible and auditable. Projects implement burning mechanisms through smart contracts that automatically send tokens to dead addresses or utilize deflationary protocols like EIP-1559 on Ethereum, which burns a portion of transaction fees. This reduction in supply can theoretically increase scarcity and token value if demand remains constant, though actual price impact depends on market dynamics and consensus among participants.

How does Burn work?

Burning removes tokens from circulation permanently. The common method is a function in the token contract that deducts a balance and subtracts the same amount from total supply, so the change is recorded on-chain and anyone can verify it. An older method sends tokens to an address with no known private key, such as one ending in dead, leaving them visible but unspendable. Burns happen for different reasons: protocol rules that destroy part of each fee, redemption of a stablecoin for cash, or moving assets between chains, where tokens are burned on one side and minted on the other.

An example

A protocol charges a 0.1% fee on trades and burns it. On $50 million of monthly volume that destroys $50,000 worth of tokens, and the total supply shown on a block explorer falls accordingly. Whether that affects the token's price depends on demand and many other factors; a smaller supply does not by itself mean a higher price. Numbers are illustrative.

Figures are illustrative only.

What beginners get wrong

• Reading a burn announcement as a guarantee of higher prices, when supply is only one input and demand can move in any direction.
• Overlooking that a team may still be able to mint new tokens, so check whether minting is disabled before treating supply as fixed.
• Sending tokens to a burn address by mistake — the transfer is irreversible and no support desk can undo it.
• A burn is not a token lock; locked tokens still exist and can return to circulation later.

Related terms

• Burn Mechanism
• Deflationary Token
• Total Supply
• Circulating Supply
• Tokenomics
• Inflation Rate

Part of

What is tokenomics, and why does token supply matter? — the subject page for tokenomics and supply, with all 14 of its definitions in one place.