crypto burning

The Role of Crypto Burning in Decentralized Finance (DeFi)

The process of burning crypto is not difficult to understand. It is similar to the buyback of shares in a traditional stock market. However, we must understand certain fundamentals to completely comprehend the concept of crypto burn in depth.

So, let’s look at the basics of burning crypto and why it is done.

What is crypto burning?

Crypto burning is the process of permanently sending a particular crypto coin into a burn wallet or eater wallet. Undisclosed and unusable wallets are called burner wallets or eater wallets. So, this technically means that once you send your crypto coins to a burner wallet, you cannot retrieve the coins back. The particular crypto coin is permanently deleted or in other words permanently “burned” and is no longer in circulation in the decentralized finance market.

Why is burning crypto a practice?

To lower the number of shares circulating in the market and thereby increase its value buyback of shares in a traditional stock market is practiced. Here, the company buys back its shares from investors at the market price, thus decreasing the number of shares in circulation and increasing the value of the shares.

Similarly, crypto burning reduces or limits the number of crypto coins in the blockchain. It creates a deficit in the decentralized finance market and consequently increases the value of the limited crypto in circulation. Crypto burn relies on the principle that the value of assets tends to increase when there is a decrease in asset supply.

Crypto burn may increase the value of the remaining currency in circulation. Also, if there is a high inflation rate on a particular coin, then burning crypto can curb this inflation rate.

However, the increase in the value of the crypto currency is not an assured consequence of the crypto burn. It is just a probable outcome.

Who can burn crypto?

Technically anyone who owns cryptocurrency can burn crypto. That is, anyone who owns cryptocurrency can send their crypto coins to a burner wallet. However, crypto burning by an investor is not advisable. This is because burning crypto is literally throwing away or burning away your money.

So, who burns crypto on the decentralized finance market? Generally, cryptocurrency developers practice burning cryptocurrency to create a scarcity of the coins in the market. This scarcity can generate a sudden demand for the cryptocurrency thereby increasing its value.

Sometimes, crypto burn can deceive investors. Developers claim the currency is in burner wallets, while in reality, the crypto is in self -controlled wallets. Here, there is a creation of a false demand for the scarce crypto currency. Therefore, to avoid such fraudulent transactions, it is better to invest in trusted cryptocurrency in decentralized finance like HZM Coin.

Conclusion

To conclude, you may wonder whether burning crypto is good or bad. The answer to this is very relative and depends on investor sentiments. It also hinges on whether there is an increase in the demand for the coin due to the scarcity. Therefore, it can rightly be said that crypto burn may either benefit cryptocurrency or be detrimental to it.

HZM Coin is a trusted name in the crypto world. It engaged in burning HZM coins in the third quarter of 2021 which worked to its advantage. HZM had a total supply of 100 billion coins and burned 95.55 billion. The burned amount includes the wallets of the founders and co-founders. Further, most of the remaining 4.45 billion coins have already been sold.

As of date, the total supply of HZM coins in the market, after burning HZM coins during 2022-24 is 3,340,665,098 Coins.

HZM Coin operates on the Ethereum Blockchain making it a user-friendly and safe cryptocurrency to trade in. The HZM Coin has a unique logo of a camel. It depicts a long journey with a commitment to persist despite the odds.