Burning is a viable attempt at balancing out economics.
Coin burn is the terminology used when coins are removed permanently from the current circulating supply. When coins/tokens are burnt in the Crypto space, they are completely wiped off. These tokens cannot be retrieved or circulated anymore.
Cryptocurrency projects undertake the burn process so that:
- There can be a more effective consensus mechanism,
- The value of coins can be increased,
- A safeguard against Distributed Denial of Service Attack (DDOS) can be put in place,
- Spam transactions can be prevented,
- A long-term commitment from the cryptocurrency project can be assured.
The idea of price inflation after a burn is no rocket science. It’s the Law of Supply and Demand that affects prices. In most cases, there is an inverse relationship between supply and prices. That means if there is a decrease in the supply of goods and services (in our case, Crypto tokens) while demand remains the same, prices tend to rise to a higher equilibrium.
Why is WazirX burning its token WRX every quarter?
WRX is the native token of WazirX. Every quarter we burn WRX based on the trading volume on our Crypto exchange. As mentioned above, this process of token burn is a deflationary measure to reduce the circulating supply of our token WRX.
Here is how we are growing and burning exponentially:
How does the Burn process work?
In simplest terms, this process is similar to destroying or eliminating the existence of a selected portion. The decided number of WRX tokens will be burned entirely from the central repository. As an investor, you will lose nothing. The tokens in your portfolio will remain untouched.
For curious minds, here is some more information – Technically, for WRX, the burn process is simple. Through the ‘Burn Feature’ on the BEP2 chain, the desired number of tokens are burnt, and the process is completed.
Note: BEP-2 is a technical standard for the issuance and implementation of tokens on the Binance Chain.