Understanding what token burning consists of
Hello PROJECT-HOPE community, it is but that you are having a great week. Take good care of yourselves, even though things are a little better, we must continue to stay safe.
Within the DeFi financial system, and in the crypto environment in general there is activity that is carried out with the goal of positively affecting the economics of some project. Luckily, the economics of cryptocurrency projects, and that aspect in particular have more leeway than when it comes to traditional economics.
I am talking specifically about token burning. This activity consists of literally disappearing, taking out of circulation a quantity of a specific token, so that when there is less quantity in circulation, its price can go up.
I think that, in a certain way, we all know the effect that the little existence of something has on its price. For example, tokens that are produced by the millions, and never stop being issued, are more likely, with the passage of time, to tend to fall in price, as happens with the dollar, the euro, or any other fiat currency. Although we know that there are some cryptocurrencies that, despite the fact that their issuance will be indefinite, do not stop rising.
But, in general terms, when there is little of something, when something is scarce, it costs more to get it and as a consequence its price will rise. This is not a new strategy. It is something that many projects apply precisely for that purpose, to raise or maintain the price of the cryptocurrency.
But does it always work?, obviously not. Because it is not the only thing that is necessary for a crypto to maintain a specific price. For example, its usefulness, people's confidence in the project, the number of tokens produced daily, among other things.
But, even so, it is still a fundamental part in many cases, of the economy of many projects. I want to bring a recent example of a project in which I am participating from the beginning, where you can clearly see the effect of token burning.
As you can see, the WOX token, from the wox-defi project until March 22, had a ratio of 3 TRX for each WOX token. That day, investors would have the possibility to withdraw their profits, if they so wished, which meant that there was a massive sale, as usually happens with the beginnings of this project, and the price dropped abruptly.
Taking the price of WOX to its lowest level. But, yesterday, March 29, a burn of almost 30,000 wox tokens was carried out, and it can be seen how the price came to balance practically equal to one TRX.
This is how token burning works. Thank you very much for reading my post.
Currently, related to Steemit, @xpilar and his team are carrying out a DeFi Project, specifically on the TRON Blockchain. Where the Token WOX is the protagonist.
Here are some links that can serve as a guide:
- Learning to Stake WOX Token - WOX-EXCHANGE
- Liquidity Mining is Now Live and Working!
- Liquidity Mining is Now Live and Working!
You can also check the official blog of the project: @woxexchange / Make sure you do your research before you invest..
You can also have information by entering the official discord group: https://discord.com/invite/8FZ6WGkEzs
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Twitter | Instagram | Discord | Youtube | Telegram: @josevas217
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hello @josevas217
A very concrete and precise publication to know how the token burning consists . no doubt that the Wox token as a result of that burning could improve its price and I am sure that the @xpilar team will seek other measures to make the burning of the Wox token that will benefit all those who are part of the WoxDefi.
Thank you very much for sharing
Hello @josevas217, this clarification is quite timely, considering that it is a strategy that they have been applying in some tokens for many years and as true as you say it will not always give the best results, but what I have observed is that for a certain group of people means a positive opportunity.
Yes, there are no foolproof strategies. But burning can help.
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Greetings friend @josevas217, very good explanation on this topic, and the best example we can currently take to understand it even better is what is happening with the SLP token of Axie Infnity, which has depreciated in value due to high token generation and low token burn.
It is a good example that you raise, that's right. More is produced than is burned, which is why the SLP continues to fall.
Greetings @josevas217 💕❤️💕
I must say I'm really impressed with your write up and I can also notice some similarities between your post and a recent content I just published which has to do with token reduction... This is really great and token burning is definitely one of the top best method to adopt whenever the crypto project needs their token to be more valuable in future.
Thanks for sharing this great post with love from @hardaeborla and I hope you have a great day ahead 💕❤️💕
I blogged about burning recently and I must admit that I love the research and knowledge that I gained from it. It was a nice interesting experience I must admit. Burning in cryptocurrency is an amazing thing. Nice post.
Ok, I will check out your post where you talk about this topic. We are always learning. Thanks for commenting.
hello @josevas217,
you are absolutely right, not only token burning influences the price. many projects that do not develop a good internal economy end up failing even when they burn their tokens, in my point of view token burning should be part of a larger strategy that guarantees the demand for tokens.
This is evident, not only token burning is sufficient to maintain a fair price. The reality is that it is only one part of a set of strategies.
Hi @ josevas217, thanks for sharing this valuable information with all readers, it is important to know the meaning of what is token burning, because if we are immersed in the world of cryptocurrencies is necessary to know these basic concepts.
Greetings
Greetings @josevas217 thank you for keeping us informed about DEFI finance developments, and moreover for sharing valuable information related to the developments behind WOX.
Regards
Thanks to you for commenting
This is an excellent explanation of token burning. In my opinion, burning could serve as a tool to drive the price of a token upwards. This is because burning reduces the number in circulation and as such, creating more demand for the token and price ultimately increases.
Nice piece buddy
Thus, the idea is that there will be less quantity and in theory, demand will increase and for this reason the price should go up. However, this is not always the case.