When token burning occurs, a specific amount of cryptocurrency is permanently removed from circulation.
Think of a central bank that decides to burn a part of a fiat currency’s total money supply to cut down the rate of inflation and increase the value of the asset.
The burning – or destruction – of the coin is not to be taken literally. Instead, what happens is that with a coinburn tokens are taken out of circulation by placing them in a public wallet (also called “eater address”) from which these tokens can never be retrieved.
Token burning is so important in the cryptocurrency space that some projects have even based their consensus mechanisms on the deflationary strategy; others have even gone so far as to create a self-destructing digital asset that burns a part of the total supply with each transaction.
