Cryptopidonia: why projects burn their tokens?
Source:
Burning a token — is the destruction of a certain number of tokens (or coins) to reduce their number in circulation. This method has been used successfully with startups, traditional businesses and even global corporations in the case their shares.
For example, in the spring of this year, Apple has launched a plan to buyback $ 100 billion with their subsequent burning and increased dividends by 16 percent. One of the founders of the financial platform Humaniq Alex Fork has shared with his thoughts on the implementation of the burning procedure of tokens in the stock market.
theWhy do it
The Main purpose of burning tokens is quite simple — companies need to sustain growth rates of their assets. Moreover, each startup in the crypt of the need to ensure a clear, functional and profitable use of tokens in the ecosystem of your project.
The Process of redemption and burning tokens have the potential to become the new standard for the future of the industry , if the startups will be to perform this procedure is reasonable and fair, and will also be able to prove their economic viability. That is why the company should always provide evidence that it burned their tokens.
This model of development implies a gradual reduction in the number of coins in circulation and an increase in demand for them. In fact, projects can make their own disinflationary measures with multiple mechanisms for increasing the price of the token. To do this, they can buy from the exchanges for incineration or introduce loyalty programs that will encourage holders for a long period of abstinence from the sale of coins.
Sometimes it is enough just to support the rumors about the possible destruction of the coins. For example, the founder of TRON Justin San constantly reminded his followers about burning the tokens of the project on their streams. Although other members of the startup did not confirm the rumors, the hype surrounding the coins is gradually growing. Finally, in June burning a billion tokens TRX.
There are several scenarios under which the burning of coins would be advantageous.
theincreasing the value of tokens
The smaller token is traded on exchanges, the higher exchange rate (a simple consequence of the law of supply and demand). Most of the projects and so is of limited emissions, but to reduce the number of coins in circulation is still need to gradually, so as not to alter the equilibrium of the stock market.
In such a scenario valid, the exchange Binance, which burns its own tokens each quarter. Thus, the company makes its assets attractive to investors in the long term.
thebug fixes
Sometimes, developers can release to the release of a product with a bug that can «cure» only a burning token. These problems include an excessive number of issued coins, the random creation of a wrong address or the increase in emissions due to technical errors.
To Solve the trouble this type is easy enough to send the right amount of tokens to the address from which they cannot be withdrawn. In fact, the term «burning» slightly incorrect. Coins do not cease to exist by themselves, they are simply «bury» no purse.
thegetting Rid of the excess with ICO
Most of the projects limit the number of tokens that they're going to sell during the ICO. In some cases, a startup is unable to close all their goals on crowdfunding and part of the cryptocurrency remains on the wallets of the company. Often developers just sell the remaining tokens on the market to get good profit.
However, a much better scenario is to burn unsold tokens. So a team gives confirmation to its investors that it only uses the borrowed funds for business purposes. Thus, the income from ICO is justified by the actual demand for the tokens that fair enough for the market and holders.
theProvide dividend
If the project produces a security token, its investors can be compared with holders of traditional shares that receive dividends. The company buys tokens and burn them, thereby creating a gap in the market.
Moreover, instead of a dividend payment startups can simply increase the value of their digital assets by burning excess tokens. For even greater investor interest better than a whole series of programs burns and incentives.
Recommended
the long-awaited summer. Niche cryptocurrency supported the event and gave unusually hot week. During the last seven days, we learned about the new line of graphics cards from AMD, the mining in TON and hard forks . In addition dealt with the profita...
Co-owner Bitcoin.org Coinbase Pro ridiculed and called a stock exchange Scam
co-Owner Bitcoin.org and most popular forum about cryptocurrency Bitcointalk.org Cobra called Coinbase Scam Pro trading platform American crypto currency exchange Coinbase. In his tweet he wrote «if you read Coinbase Pro backwards, get the word ...
The Ethereum is a cryptocurrency Scam. A new report Chainalysis
When people learned how to create a new cryptocurrency and began to build their infrastructure like marketplaces, in the field began to appear and fraud. According to blockchain auditor Chainalysis for the past two years, fraud in the ecosystem has s...
Related News
VEB and the Grozny mayor's office transferred the housing sector on the blockchain
In February, the first Deputy Chairman of VTB Olga Dergunova positively the prospects of the blockchain. According to her, the technology will improve the speed of transactions and security standards. To move from words to action ...
Hacker 1337. How to hack Etherscan not to cause any harm
Monday on the website Etherscan.io appeared a pop-up message with the numbers 1337. The visitors began to panic and spread rumors about hacking Explorer. really hacked, but the damage from a hacker attack was zero. About it writes...
Trading cryptocurrency on Bakkt will be backed by real bitcoins. What does it mean?
the Trading platform , announced a couple of weeks ago, will not support trading with leverage. This was told by CEO Bakkt Kelly Loffler. Instead, the project will provide services to institutional investors and to build infrastru...
China has updated the ranking of the most promising cryptocurrencies. Who's on it?
In may, the Chinese authorities own rating of cryptocurrencies in which the coins were located on the basis of their prospects. The first five lines occupied the Air, STEEM, Lisk, NEO and Komodo. located on the 13th place. Now em...
Pereobulsya: Nobel prize winner, unexpectedly called Bitcoin a better alternative to gold
In early August, Nobel laureate in Economics Paul Krugman that cryptocurrencies will throw the financial system for 300 years ago. Digital money is too expensive to maintain and difficult to produce, he added. Now, Krugman suddenl...
Will to live: miners consume three times less electricity than the banking sector
In the July edition of the Economist with reference to the expert Alex de Vries that the device is for mining of Bitcoin consumes about 22 terawatt-hours of electricity — the same as the whole of Ireland. However, it later emerged...
The ideal deal: how one investor traded their bitcoins for 2.3 million fake euros
Korean investor turned out to be a victim of fraud during the transaction he traded their bitcoins on ordinary paper with printed euros. The deception was revealed later, when the Korean found in a pile of fake money non-existent ...
Failed fork: Bitcoin Cash is rapidly losing popularity in Commerce
looks Like the last few months have been disappointing for holders of Bitcoin Cash. According to analysts Chainanalysis, use of cryptocurrency in Commerce plummeted. About it writes . the What will happen to Bitcoin Cash the Group...
Payments for utilities in the cryptocurrency became a reality. Lucky?
Cryptocurrency exchanger Cointree announced a partnership with payment platform Gobbill, which will allow Australian customers to pay for utility services in the crypt. The company will act as an intermediary and convert to Fiat. ...
CoinShares CEO: Bitcoin will go in the footsteps of Amazon and Microsoft
Analysts predict Bitcoin CoinShares the same fate as the shares of major companies. According to them, after a global correction, the cryptocurrency still take a new record in the long term. About it writes . the When will Amazon ...
The tax will take up. Why in Norway will tighten control over reporting?
last week, unknown to arrange explosions on three mining farms company New Mining Company in Norway. The attacker did not like that businesses make too much noise, and businessmen refuse to meet the locals. Now the Norwegian mine...
Coins waiting: in Leningrad region has opened the first phase of mining-farm to 20 MW
In January, private investors for the first time in history in Russia, two plants for mining. It was about Kizelovskaya GRES in the Perm region of the 23.6 MW CHP and Sarapul in Udmurtia 10 MW. Prior to the adoption of laws on min...
Time to buy: why Litecoin is considered to be undervalued coin?
According to the latest market analysis from eToro, Litecoin is one of the most underrated coins. Analysts claim that now the cryptocurrency is trading with «sale». About it writes . How to buy Litecoin it Turns out that...
The Heist of the century: three hackers from China stole $ 87 million in cryptocurrency
China detained three suspects on charges of stealing cryptocurrency. Hackers accused of stealing bitcoins and other coins worth about $ 87 million. According to information , this is one of the biggest crimes to the crypt in the P...
In Ethereum can receive fixed fees. How will receive the miners?
acne Buterin proposes to abandon the current model of the auction for a fee in Ethereum in favour of fixed remuneration. Vitalik notes that this method of operation will suit the majority of the public block chain, including Ether...
the head of the Indian branch of the Bitconnect Gives Darji was arrested this week at the Delhi airport immediately after arrival from the UAE. He is accused of stealing millions of dollars of investors ' infamous project. About i...
The largest shareholder of Uber will not invest in pre-IPO Bitmain. What's wrong?
In early August, the sources of attracting investment from Bitmain Uber, Softbank and Tencent in the pre IPO on the Hong Kong stock exchange. The investment amount was not disclosed. It was reported that as a result of the valuati...
What coin is the most popular among scammers? The Answer Is "Kaspersky Lab"
In March, the analysts "Kaspersky Lab" estimate that last year the number of virus attacks to a hidden mining has increased by half. If in 2016 year, there were 1.9 million such crimes in 2017 and 2.7 million. Now the experts sai...
In late July, Google's placement in the Google Play applications for mining and remote control of mining cryptocurrency. Such measures are accepted from reasons of safety, the company said. Mining too much overloads the device. N...
Faster all: Nano, the cryptocurrency reached a record number of transactions per second
August 18, the cryptocurrency has broken its own record, the number of transactions per second (TPS) Nano reached 750 units per second. The project team also announced the ability to support the stability of the blockchain at 75 T...
Comments (0)
This article has no comment, be the first!