Many users and customers in the cryptocurrency market are not looking forward to the concept of burning digital currencies. Or maybe they are not familiar enough with the details of this strategy and how it happens. So, in this article, we will learn about the general concept of burning cryptocurrencies.
The concept of burning digital and cryptocurrency
The developers and programmers in the field of digital and cryptocurrency have created a new strategy in which they address the problem of high inflation or to control and control the number of cryptocurrencies of some kind. This strategy used in the field of digital currencies includes deleting a section of the currency, taking into account that it is among the group of currencies that are allowed to be traded on the various platforms for digital currencies.
Some examples of cryptocurrency burning
In fact, one of the most famous digital currencies that developers have burned is the Ethereum currency in 2020. Vitalik Buterin burned a large percentage of the cryptocurrency Ethereum. At that time, that percentage amounted to about ninety percent of the total currency of this currency, 90 percent. As for the remaining amount of Ethereum digital currency, which amounted to ten percent (10%). The founder of the Ethereum coin, Vitalik Buterin, donated it to the India Relief Fund.
Moreover, the Binance platform burns many cryptocurrencies periodically. Like burning BNB from one period to another. In the past, it was expected that the developers would burn the Chiba digital currency.
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Implementation steps and mechanism
Burning coins is not easy or random. Rather, it requires following specific rules and in a certain sequence. In order for the process of burning any particular currency to be carried out safely and smoothly. How much and without facing any problems and from these steps are the following:
First, the holder of the cryptocurrency calls the copy function. This is so that he is claiming that he is burning a certain number of digital currencies. Then, in the next step, it examines the contract and checks whether the person has the specified number or sufficient quantity of this cryptocurrency in his wallet.
And if, for example, this person does not have a sufficient number and sufficient amount of encrypted digital currencies, the function requested by the user or developer will not be implemented. On the other hand, if the developer has a valid number of encrypted digital currencies in his wallet. These encrypted digital currencies will be subtracted from the user's wallet.
And then you update the total supply and burn those cryptocurrencies. In addition, when the currency burning process is carried out successfully, this means the destruction of those currencies and burning them forever. It is also difficult, or even impossible, to retrieve and restore these encrypted digital currencies after successfully burning them.
Burn proof mechanism
As for the concept of Proof of Burn for any cryptocurrency, it is a consensus algorithm that addresses a specific problem, which is the problem of power consumption in the Proof of Work. In fact, the proof of burning is referred to as proof of work without wasting energy. Also, some may use it to separate an encrypted digital currency from another encrypted digital currency. And at the end of it. The concept of Proof of Burn is basically that users and customers burn their cryptocurrency for mining in a protocol that fits and agrees with Proof of Burn POB. And this strategy follows the concept of destroying the encrypted digital currencies held by the miners and then giving them the mining rights that belong to them.
What is the reason for burning the coin?
In fact, there are many reasons why a user or someone burns the encrypted digital currencies in his wallet or his own, including the long-term commitment: In fact, one of the main reasons that calls for deleting some encrypted digital currencies. It pushes people to commit for an extended period of time. Thus, this leads to enabling and stabilizing the prices of digital currencies.
In this case, investors do not have the desire to spend or sell their cryptocurrency for long periods of time.
In fact, there are many other reasons why people, and developers in particular, burn their cryptocurrency.
Also, the increase in the value of new currencies pushes users to trade them more than other cryptocurrencies. This newly created digital currency has a high value, unlike other encrypted digital currencies.
Thus, the demand for it increases, especially by investors. It is worth noting that the mechanism of burning encrypted digital currencies is one of the useful means that help in creating other more advanced cryptocurrencies with various applications and features that can be adopted to some extent. Which expanded the scope for users and investors to obtain new digital currencies with more advanced and useful features.
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