Burning is a term used in cryptocurrency to describe taking a certain amount of tokens out of circulation to increase the value of the existing tokens already in circulation.This is done by transferring the desired amount of burner tokens into an inactive, unlocatable crypto wallet, causing the tokens to be purposefully lost. Unable to be accessed, these tokens have essentially been destroyed, hence the term burned.
Logarithmic Finance (LOG) and Terra (LUNA) are both tokens that participate in burning, however, their reasons are very different.
Logarithmic Finance (LOG) Lights the Way for Deflationary Economies
Logarithmic Finance (LOG) is an innovative swapping protocol, designed to facilitate connectedness between early-stage creators and investors in new and upcoming crypto ventures.
The token, which is currently in presale, intends to implement a burning mechanism into their economy, taking on a deflationary model of finance.
This model dictates that the number of tokens in the Logarithmic Finance (LOG) economy will slowly decrease over time, allowing tokens to rise in value as they are held whilst also encouraging early buy-in.
Furthermore, the platform intends to burn a percentage of unsold tokens remaining after their presale, as a way to reward early investors by giving their purchased tokens an increase in value.
This all combines to create an environment where Logarithmic Finance (LOG) token holders are encouraged to hang on tight to their tokens, whilst simultaneously stimulating the economy in order for the burning process to continue.
The rate and circumstances under which this burning takes place is also something decided on by the Logarithmic Finance (LOG) community, via the LogDAO which is accessible to those in possession of Logarithmic Finance (LOG) tokens.
This means that the growth of the economy is something that can partially be controlled by the community, with the choice to slow or accelerate burning. This is a fantastic way to give financial control to the community and create a decentralised network which promotes universal success.
So, if you are looking for an exciting project utilising burning in an efficient and rewarding way, look no further than Logarithmic Finance (LOG).
Terra (LUNA) Is feeling the burn
Another cryptocurrency which utilises burning, which has been covered across a wide range of media for doing so in recent days, is Terra (LUNA).
After having suffered a catastrophic crash earlier this month, Terra (LUNA) has been desperately attempting to return their token to their initial value, by burning a massive reported 85% of their tokens.
This mass burning is occurring, primarily, due to Terra’s (LUNA) connection to the stablecoin TerraUSD (UST). With both tokens suffering from this crash, the only conceivable way for TerraUSD (UST) to return to its pegged $1 value is through the mass burning of Terra (LUNA) tokens, to increase their, and thus their paired stablecoin’s, value.
Burning is not a new concept for Terra (LUNA), and in fact, is part of the ecosystem that fuels the stablecoin. To keep the value of TerraUSD (UST) at its $1 pegged value, Terra (LUNA) tokens are burned and minted, keeping the value stable despite the volatility usually found in the crypto market.
This is why the mass burning of Terra (LUNA) is occurring, in an attempt to return TerraUSD (UST) to its initial value.
Will this mass burning solve the issue and give Terra (LUNA) a chance to return to its position as one of the top cryptocurrencies? And how will perceptions of stablecoins shift with the knowledge that stability is not a guarantee?
With this story still developing, the future of Terra (LUNA) is impossible to predict.