LYO Token Burning is about to start! LYOCREDIT is starting a token burning procedure this week. Token burning involves removing a certain amount of tokens from circulation and reducing its supply. Continue reading to learn what is token burning.
What is token burning?
Token burning is a process where miners and developers remove tokens from circulation. In other words, token burning is a process of destroying the tokens so that it is not available for further use (trading or otherwise).
Developers and miners will send the coins to the specialized addresses whose private keys are not accessible. In addition, they should provide the proof-of-burn algorithm to the market to facilitate cross-verification.
Why start token burning?
The LYO token distribution has changed. A part of the percentage reserved for minting (48%) will be unused, as LYOPAY has transferred the minting to the new DeFi token LFi. The token owned by users for minting won’t be burned.
Token burning occurs when a cryptocurrency token is intentionally sent to an unused wallet address to remove it from circulation. The address, which is called the registration address or food address, cannot be accessed or assigned to anyone. Once a token is sent to a registration address, it will be gone forever.
Anyone who owns a cryptocurrency can burn it, but it’s not exactly something you’d want to do for no reason, since you’d essentially be throwing money away.
Most of the time, the developers of a cryptocurrency are the ones who decide to burn a certain amount. Token burning reduces the supply, making tokens of this cryptocurrency more scarce. This scarcity can drive the price up and benefit investors.
There are a few caveats to mention about coin burning. It is not guaranteed to increase the value of the crypto. In fact, many see little to no benefit from it.
Token burning can be used to defraud investors. Developers can claim they are burning tokens when they are actually sending those tokens to a wallet they control. To avoid this, it is important to do your research on the crypto you are investing in or stick to safer crypto stocks.
Developers also burn tokens as a way to hide whales who hold large portions of a cryptocurrency. Let’s say a developer launches a cryptocurrency with 1 billion tokens, holds 100 million and immediately burns 600 million. It looks like the developer owns 10% of the supply because the initial supply was 1 billion. But the developer actually owns 25% of the 400 million tokens still in circulation, which is obviously a much larger amount.
What will happen?
LYOPAY explains why LYO token burning will benefit the community:
• A total of 59,138,555 LYO tokens will be burned at this address: https://bscscan.com/…/0x9bad6c75b5a4e72df8147cc89d068cc….
• The total supply will decrease by 23%. Down from 250,000,000 LYO, the new total supply will be 190,861,445 LYO.
• White paper and documentation will be updated with the new issues.
Will the value of LYO be affected?
It is possible and in a positive way. By reducing the total number of available tokens, the price of a single one increases, or at least the stability of its price is strengthened.
How did token burning start?
The idea behind token burning dates back long before cryptocurrencies. It is very similar and probably inspired by share buybacks.
A share buyback is when the company that issued the stock buys back shares at market price and re-absorbs them, reducing the number of total shares in the market. While redemptions and token burning do not exactly match, they are similar concepts that can serve the same goals.
Token burning started to become popular in cryptocurrencies in 2017 and 2018 when several coins, including Binance Coin (BNB), Bitcoin Cash (BCH) and Stellar (XLM) burned tokens to reduce supplies and to boost prices. More recently, it has been a common strategy with newer cryptocurrencies that launch with massive token supplies.
One of the main reasons token burning has caught on lately is because it allows cryptocurrencies to start at cheap prices and then artificially inflate their value once people have invested. A new cryptocurrency can launch with 1 trillion tokens worth a fraction of a cent and attract investors because of the low price. Later, developers can burn billions of tokens to increase the price.
Which tokens can be burned?
Every cryptocurrency can be burned, including LYO token burning. All cryptocurrencies can be sent to a registration address, which means it is possible to register cryptocurrencies with any of them.
Here are some notable cryptocurrencies that have been burned and the circumstances surrounding these events:
- Cryptocurrency exchange Binance began holding quarterly clearings of its Binance Coin in 2017. The exchange has committed to doing so until 50% of the total Binance Coin supply has been removed from circulation.
- The Stellar Development Foundation burned through more than half of the Stellar supply (55 billion XLM tokens) in 2019.
- In a possible attempt to gain attention, the developers of Shiba Inu (SHIB) gave half of the offering to Vitalik Buterin, co-founder of Ethereum (ETH), in 2021. He immediately burned 90% of these tokens and donated the rest.
What is proof of burn?
Proof of burn is a consensus algorithm that blockchains can use to validate and add transactions. It is used to prevent fraud and ensure that only valid transactions take place.
Blockchain is a record of a cryptocurrency’s transactions, and its consensus algorithm is how it confirms transactions. The two most popular consensus algorithms are proof of work and proof of stake. Burn proof is a newer alternative.
With proof-of-burn, crypto miners must burn their own tokens to earn the right to mine new transaction blocks. The more tokens they burn, the more they can mine. In return, participants receive rewards in the cryptocurrency they mine.
Some proof-of-burn cryptocurrencies require miners to burn the same currency they mine. There are also some that allow miners to burn other types of crypto.
The advantage of proof-of-burn is that it is an efficient way to validate transactions and does not have the energy requirements of the proof-of-work model.
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