Token Burning
Web3 / tokenomics
Token burning is the permanent removal of cryptocurrencies from circulation by sending them to addresses that cannot be accessed or spent, typically addresses with no known private keys. This deflationary mechanism reduces the total supply of tokens in existence, potentially increasing scarcity and value for remaining tokens. Burning can occur through various methods including protocol-level mechanisms, buyback programs, or transaction fees being directed to burn addresses, creating a continuous reduction in circulating supply over time. Example: Ethereum implemented EIP-1559, which automatically burns a portion of transaction fees paid in ETH, removing billions of dollars worth of ETH from circulation since the upgrade in August 2021. Why it matters for tokenomics: Token burning creates deflationary pressure that can counteract inflation from new token emissions. This mechanism helps control long-term supply growth, potentially supporting price appreciation, and demonstrates projects' commitment to scarcity and sustainable economic models.
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