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What Does it Mean to Burn Cryptocurrency?

Stacks of gold and silver bitcoins
Photo by RODNAE Productions on Pexels.
Should You Burn Your Crypto?


The developers of Shiba Coin burned one billion tokens recently. This is about .0002 percent of the Shiba Coins currently in existence. Burning crypto is a common practice to regulate the number of coins in circulation. But, what does it mean to burn crypto?

What is crypto burning?

Burning crypto is a way to increase the value of a coin by limiting the amount in circulation. It’s a simple application of the theory of supply and demand. With less of a certain cryptocurrency available in circulation (supply), the value of the remaining coin goes up (demand). Coindesk likens the practice to a publicly-traded company buying back shares. It’s similar to how central banks moderate the amount of fiat currency in circulation.

Shiba Coin is far from the first cryptocurrency to burn a large amount. Ethereum burned over 15,500 coins in January of 2022. In fact, Shiba had burned 2 billion tokens previously. Weirdly enough, a Spotify playlist burned 20 coins for every song streamed.

Why is crypto burned?

Burning crypto combats inflation. As miners increase the number of coins minted on the blockchain, burning crypto keeps the price stable. It also ensures that people who got in early on the coin don’t have an unfair advantage. Developers burn old coins when new coins circulate. This promotes a balance between early adopters and new miners in the community. 

How is crypto burned?

Owners burn crypto by sending it to a special crypto wallet. Essentially, it’s a crypto wallet that doesn’t have an access password. Meaning once crypto enters that wallet, it’s in there forever. Notoriously, some early adopters of Bitcoin lost their fortunes when they lost the password to their wallets. Without a password, there is no way to access a crypto wallet.

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