Burning Tokens Guide
Learn how to burn tokens and understand the impact on your token's economics
What is Token Burning?
Token burning is the process of permanently removing tokens from circulation by sending them to a wallet address that is unspendable, often called a "burn address." Once tokens are sent to this address, they can never be retrieved or used again, effectively reducing the total circulating supply of the token.
Why Burn Tokens?
Economic Benefits
- Reduce total supply, potentially increasing scarcity
- Can positively impact token price if market perceives value
- Increase the percentage of total supply that holders own
- Can increase the overall distribution rate per holder
Strategic Reasons
- Correct oversupply issues from initial token creation
- Signal long-term commitment to token holders
- Part of a scheduled deflationary tokenomics model
- Remove unclaimed or unused tokens from circulation
Types of Token Burns
- One-time burns: A single event where a significant portion of tokens are removed
- Scheduled burns: Regular burning events at predetermined intervals or milestones
- Buy-back and burn: Using project revenue to purchase tokens from the market and burn them
- Fee-based burns: Burning a portion of transaction fees collected from token transfers
Important Consideration
Token burning is irreversible. Once tokens are sent to a burn address, they can never be recovered. Always double-check amounts and addresses before executing a burn transaction.
Impact on Revenue Sharing
For RevShare tokens, burning can have specific effects on the revenue-sharing mechanism that are important to understand before proceeding.
Distribution Rate Impact
When tokens are burned, the remaining token holders receive a larger percentage of distributions:
Original: 100 tokens total, you hold 10 (10% of distributions)
After 50% burn: 50 tokens total, you hold 10 (20% of distributions)
This can make your token more attractive to holders, as each token now represents a larger share of future distributions.
Effect on Minimum Holding Requirements
If your token has a minimum holding requirement for receiving distributions, burning tokens doesn't change this absolute number. However, it does make that minimum represent a larger percentage of the total supply:
Example: With 1M total supply and 1,000 minimum holding (0.1%), after burning 500K tokens, that same 1,000 minimum is now 0.2% of supply.
You may want to consider adjusting your minimum holding requirement after significant burns to maintain the same relative percentage threshold.
Planning Your Burn Strategy
Before burning tokens, it's important to plan your strategy carefully and consider the following factors:
Determining Burn Amount
- Consider the desired impact on token economics
- Start conservative - you can always burn more later, but cannot reverse a burn
- Consider announcing burn plans in advance for transparency
- Typical burn amounts range from 5-30% of total supply
Timing Your Burns
When to burn tokens can be as important as how many to burn:
- Project milestones or achievements
- On a regular schedule (quarterly, bi-annually)
- After significant accumulation of tokens in treasury
- During major project announcements or updates
Communicating Your Burn
Effective communication around token burns helps maximize their positive impact:
- Announce burn plans in advance
- Explain the reasoning and benefits to your community
- Share the burn transaction publicly for verification
- Update your community on the new circulating supply
- Consider updating any documentation that references token supply
Step-by-Step Guide to Burning Tokens
Connect Your Wallet
Connect the wallet that holds the tokens you want to burn.
Select Your Token
Choose the token you want to burn from the dropdown menu or paste the token address.
Token Address or Select From List
MyToken (MTK)
Enter Burn Amount
Specify how many tokens you want to permanently remove from circulation.
Amount to Burn
Balance: 500,000
100,000
Current Supply:
1,000,000 MTK
New Supply After Burn:
900,000 MTK
Reduction Percentage:
10%
Warning: Token burning is irreversible. Double-check the amount before proceeding. Burned tokens cannot be recovered.
Confirm and Execute Burn
Review all details and confirm the burn transaction.
PERMANENT ACTION
You are about to permanently burn 100,000 MTK tokens. This action cannot be undone. The tokens will be removed from circulation forever.
Verify Burn Transaction
After the burn is complete, you can verify the transaction on the blockchain explorer.
Burn Transaction:
5UbLs...K8n
New Supply:
900,000 MTK
Status:
Confirmed
Consider announcing the burn to your community and sharing the transaction link for transparency.