The term “token burn” refers to the act of permanently removing a coin or token from circulation. This is achieved by sending the coins or tokens to a specific address that can receive but cannot send crypto. It’s important to note that this differs from a “dead wallet,” which remains inactive for an extended period without any transactions.
Why Does Shiba Inu Have Token Burning?
Shiba Inu SHIB/USD, created in August 2020 by Ryoshi (a pseudonym) and others, gained significant attention in May of the following year when its founder(s) sent half of the supply to Ethereum ETH/USD co-founder Vitalik Buterin. Vitalik decided to burn 90% of his SHIB holdings, which accounted for more than 40% of the total supply (approximately 410 trillion coins).
The act of burning SHIB tokens by Vitalik caused a surge in Shiba Inu prices, nearly a 40% increase. The Shiba Inu community decided to continue burning tokens in an effort to increase the value of the remaining tokens and reward loyal holders. However, the sheer size of the total supply posed a challenge, as too many tokens were chasing too few dollars.
Reasons For Token Burning
There are several reasons why cryptocurrency projects engage in token burning despite the seemingly counterintuitive act of destroying their own tokens. These reasons include:
Scarcity: Burning tokens increases the rarity of the remaining tokens, creating a sense of scarcity that can potentially drive up their value.
Inflation Control: Token burns help maintain a stable and predictable inflation rate by reducing the overall supply of tokens in circulation.
Demand and Value: Burning tokens can drive up demand for the remaining tokens, potentially increasing their value and attracting more investors and speculators.
Where Do Burnt SHIB Tokens Go?
The SHIB burn mechanism operates through specific wallet addresses that store the burned tokens. The Shiba Inu development team does not create these burn addresses but is part of the Ethereum network and used by other tokens as well.
There are three main SHIB burn addresses presently in use. The first is the same address Ethereum co-founder Vitalik Buterin used to burn a significant portion of SHIB tokens. The Shiba Inu team uses the second burn address for ShibaSwap listings. The last one, known as the Black Hole, is associated with the Ethereum genesis address.
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Tracking SHIB Burns With SHIB Burn Trackers
All SHIB burn transactions are transparent and can be tracked on the Ethereum blockchain. Two popular websites, Shibburn and Shiba Burn Tracker, provide real-time records of SHIB burn transactions. These platforms offer details about the burn addresses involved, the amount of tokens burned, and timestamps.
Clarification On Price Impact
It is essential to understand that massive token burns alone may not significantly impact the price without continuous and substantial token purchases used for burning. Shibburn, in a blog post, explains that burning a large number of tokens in a short period might not affect the price when much larger transfers are being purchased daily. The price of a token isn’t solely determined by burns alone. Factors such as demand, liquidity, and the overall supply of the token play vital roles in price movement.
Supply and demand have always been key factors in price movements across various markets, including cryptocurrencies. If the demand for a token surges and more people buy it, the available supply decreases due to the burning process, creating scarcity. This increased demand and reduced supply can positively influence the token’s price, making it more valuable to traders and investors.
Price Action: At the time of writing, SHIB was trading at $0.000007382, up 1.34% in the last 24 hours, according to Benzinga Pro.
Read Next: Here’s How Much You Should Invest In Shiba Inu Today For A $1M Payday If SHIB Hits 1 Cent?
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