Glossary
Token Burn
What is Token Burn?
Token burn is the process of removing tokens from circulation by sending them to an unusable address, often referred to as a “black hole” or “burn address”. This procedure can be used for various reasons, such as reducing the total supply of tokens, migrating to a new network, or increasing the value of the remaining tokens.
Most projects use burn and mint mechanisms to manage the token supply and control inflation. While minting creates new tokens, burning removes them from circulation, effectively reducing the available supply. This technique is especially useful for managing reserve-backed , where the issuer can burn tokens to maintain the peg to the underlying asset. In this example, when users redeem the stablecoin for USD, the issuer burns the equivalent amount of USD-backed tokens.
