What is a token burn?

A token burn is the permanent removal of crypto tokens from circulation. It is the reverse of minting, which creates new tokens. Once tokens are burned, nobody can spend them again, so the total supply that can ever move goes down.

How does a crypto burn work?

The most common method is to send tokens to a burn address. This is a valid wallet address that no one holds the private key for, so anything sent there is stuck forever. A well-known example on Ethereum-style chains is an address that ends in the letters "dEaD". It looks deliberate because it is a vanity address, and the odds of anyone generating its matching key are considered impossibly small.

Some tokens have a burn function written into their smart contract instead. Calling it simply reduces the balance and the recorded total supply, with no transfer needed. Either way, the result is the same: the tokens are gone and the burn is visible on a block explorer.

What is the EIP-1559 burn on Ethereum?

EIP-1559 changed how gas fees work on Ethereum. Each block has a base fee set by the protocol, and that base fee is burned rather than paid to the block producer. Users can add a separate tip, which the producer keeps.

The proposal gave several reasons for burning. It keeps ETH as the only currency used for fees, it offsets some new ETH issuance, and it removes any reason for producers to push fees up artificially. Because the burn happens automatically on every transaction, how much ETH is destroyed depends on how busy the network is.

Why do projects burn tokens?

Projects burn tokens to reduce supply, which ties into a coin's tokenomics. BNB is a clear example. It launched in 2017 with a supply of 200 million and has a stated target of 100 million. Since late 2021 its quarterly Auto-Burn uses a formula based on price and the number of blocks produced. BNB Chain also burns part of its gas fees in real time under a separate rule called BEP-95.

By mid-2023, quarterly burns had removed about 48 million BNB in total, according to The Block. Figures like these change every quarter, so treat them as a snapshot.

Does a token burn raise the price?

Not necessarily. A burn reduces supply, but price also depends on demand, unlocks of new tokens, and wider market conditions. A small burn on a token with a huge supply may do very little. Some projects also announce burns mainly as marketing, so it helps to check the actual amounts on-chain and compare them with total supply.

Burning is also irreversible for ordinary users. If you send your own tokens to a burn address by mistake, there is no way to get them back.