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The Steemit Crypto Academy has brought another exciting concept for this week's contest titled Token Burn by @crypto-academy.

For the success of any cryptocurrency or blockchain project, it should be a show of confidence in its future. Which would ensure that the market is secure no matter what happens along the road. One of the simplest ways to achieve this is by burning tokens.
I will try to be as brief and clear as I can, So without wasting time, let's dive into what I have got for you this week.

Token burning is the process by which the total supply of a certain cryptocurrency decreases by reducing the existing number of coins in circulation. In many cases, token burns are used as part of an ICO (Initial Coin Offering) and involve destroying, or burning, unsold tokens.
Take, for instance, if someone invests $5,000 into an ICO for 2 million tokens, but only 1800,000 tokens were sold during the ICO, then that person would get 10% back ($200) which is burned.

When a company is said to be burning tokens, it means they are sending a specific amount of tokens to an address that has no code associated with it and cannot be accessed by just anyone. The basic idea behind this is to reduce the total supply of tokens in circulation while ensuring they do not get lost.

Token burn usually occurs during initial coin offerings (ICOs), and it's now a major concept considered by people who are seeking to start their cryptocurrency projects. But also, a token burn can still occur as a long-term strategy for a crypto project seeking to secure its future.

As with any blockchain system, they are usually two types of tokens that are generated. One is known as the Currency or Utility token, which can be used for transactions on the platform, purchasing goods, services, paying for fees, etc. The other is known as the Security or Equity** token and these tokens represent ownership over company equity.

As this blockchain system continues to mint these coins, more tokens would be generated and distributed across various exchanges. This results in abundant circulation in supply over time, as many wallets and exchanges would be holding and trading this asset.

Loss of value and inflations begins to prevail, but this is how an event called token burn comes to the rescue. There's always an invalid address that's can't be accessed in a blockchain. The company or blockchain then channels a certain amount of their tokens to that invalid address, thereby removing the coin from circulation and maintaining the value of that token.

For example, if someone has 13 million tokens they want to destroy, they could send them all to one public address. Once that address receives 13 million tokens, it becomes inaccessible and unspendable.

Let me illustrate further using our dear Steemit platform. Assuming the circulating supply of the STEEM token is becoming very high, users and holders of this token would then be required to save this token's price by channeling a certain amount of their assets to an invalid address called null.

You could send it from your wallet or exchange it for an invalid address. Another way to do this is to set a certain percentage of your token to the null address, which can't be accessed by anyone.

about to burn 25% rewards	reward set on my post

As seen in the screenshot above, I am about to make a post to the Steemit platform, and I decided to burn my reward's payout by setting 25% to null. So 75% of my payout would drop and circulate on my wallet, while the other 25% will be channeled to a wallet where it can't be circulating.

Out of curiosity, I decided to check out how invalid the null wallet address was. I first tried to create a Steemit account with the username null, but It wasn't possible as "the username already existed." So I went ahead to check who the user was, and as rightly assumed, I got proof that the wallet address was invalid.

null username used	null wallet invalid

I first noticed that the account joined in January 1970, which didn't make sense because the Steemit platform was launched at around March 2016, approximately 46 years back from the date stated here.

• I equally noticed, that users constantly send STEEM and SBD tokens to this wallet, but when I checked its wallet value, they were no STEEMS or SBD there, making it worthless.

No doubt token burning could be very beneficial to a company, whether you are going the utility token way or from ICO's. The general idea of burning tokens is to make them more valuable. Below is a list of some benefits associated with burning steem.

• INCREASES SCARCITY: Burning tokens decreases the total supply, which increases the scarcity of the remaining tokens, giving them more worth. Every cryptocurrency project has a fixed amount of total supply to be circulated, and whenever this supply is fully circulated, no additional coin would be created or supplied.
  This scarcity is what makes the demands even higher, as investors would want to buy the token now that it's still circulating, and as such, they would be so much buying pressure in the market.
  This leads to my next point which is on price.

• INCREASE IN TOKEN'S PRICE: This is by far one of the most important benefits of burning tokens. As investors continue to rush into the market to buy coins, they are usually a series of higher highs in the chart of that coin(bullish trend), which signifies that the price is significantly improving and even more investors will continue to come into the market. This usually leads to tokens breaking resistance zones, and becoming even stronger.

• CREATING ARTIFICIAL DEMAND: One reason that people choose to burn their tokens is that they want to create artificial demand for the coin. If there is a limited supply of coins available, but the demand remains high then more people will be willing to buy coins and the price will go up. Burning coins creates demand for the remaining coins and helps people determine which ones are valuable or not in terms of price.

• REDUCES INFLATION: For a currency to be functional and valuable, there needs to be limited supply in the market. Burning your tokens is an excellent way to reduce the amount of supply in the market so that each token has more value because there's less available.

The simple and most accurate reason for blockchains burning their tokens is to improve the performance of their system. It can equally be referred to as the strategy of amending and upgrading a token's value.
This gave rise to a concept called "Proof-of-Burn (PoB)". Although many people believe it is similar to the proof-of-stake mechanism, as they both make use of their native tokens to secure their networks.

Nevertheless, In PoS systems, tokens could be retrieved and utilized by the stakeholders. But in the Proof-of-Burn consensus system, it is used as a marketing strategy where the price of the token will increase after coins are burned forever. There will be less remaining supply for investors who want to buy into the project but missed out on buying early on when prices were lower. This will in turn improve and make the token scarce and valuable.

So far over the years, many blockchain projects have burned some percentage of their tokens. But let's talk about that of BNB (The Binance Native Token).

Given the fact that new tokens were being introduced to the market regularly, Binance decided to seek ways to make its token(BNB) stand out. So they decided to remove 50% of their total circulating supply in the market.

It all started in the year 2017 when the Binance Blockchain was launched with a 200 million BNB token in circulation at that time. Although their whitepaper indicated they would quarterly take out 20% of their profits to burn the BNB token in circulation until it gets to half the initial Circulating supply (100 million BNB tokens).

BNB token already burnt BNB BURN Info

The screenshot above from BNB BURN Info shows that about 132,209.38 BNB tokens have already been burned to date.

As for the result of this burn, it has been positive, and convincing. Let's take a look at the chart of the BNB token from 4 years ago.

BNB chart 4 years ago coinmarketcap

As seen in the chart above, the token was rather kind of bullishly stable from the time of its launch up until 2021, when a new burn system was introduced to boost the number of BNB tokens burnt.

This new system was referred to as the BEP-95 which aimed at speeding up the number of tokens being burnt. This new burning system was introduced on November 2021, and if you observe the result on the chart above from November 2021, you would see a significant improvement in price value.

This Twitter update shows the number of BNB tokens burnt with the new system.

twitter update on BNB Burn

The burnsteem25 company that encourages burning 25% of your publishing revenue? Do you think it will help boost the value of steem currency

Let me start by commending that the burnsteem25 company has done great to have encouraged publishers to burn 25% of their revenues.

The answer as to whether this would help boost the value of steem currency is Yes, it would. I proceed by showing us the result of the massive steem burn on the Steem blockchain, that occurred on the 22nd of March 2018 by the Steemit Inc.

steem chart from 2018 coinmarketcap

As seen in the screenshot above, before the period of March 2018, the steem circulating supply was high, which later led to an inflation in market price toward the period of January to March 2018.

The first ever massive burn steem later occurred in March 2018, which helped save the STEEM token from further bearish trends. And there was even a bullish reversal in the value of the STEEM token, which increased the performance of the blockchain.

bullish reversal after huge steem burn coinmarketcap

The BurnSteem25 company is a decentralized team of developers and entrepreneurs with the mission of improving steem and bringing it to the next level.

They want to ensure that the ecosystem thrives and continues to grow, encouraging the burning of steem tokens. When steem tokens are burned, it increases the value of your holdings. Because the more tokens that are available in circulation, the lower their value will be

In conclusion, token burning is a method that has been employed by blockchain-based platforms such as Steem to reduce inflation. The results of token burning have been positive, with some cases of tokens being burned and then returning to circulation at a higher price.

Let's work together to support the BurnSteem25 initiative, which would benefit us and the STEEM Blockchain at large.

This has been another interesting article and I appreciate the organizers of this contest. Am inviting @ishayachris, @faran-nabeel, and @mariami to check out this contest.

Note: The screenshots were taken from Coinmarket Cap and BNB Burn Info.

Thanks for your time here.