Getting started with blockchain | What is token destruction, why destroy tokens?

We often see news of certain tokens being destroyed in news reports in the industry. So, what is token destruction? How is the token destroyed? Why is the token destroyed?

Today, we will try to answer these three questions.

Coin Burning is the permanent removal of tokens from circulation. In other words, the tokens that are destroyed are equivalent to being permanently frozen and can no longer flow into the market.

So how do you achieve token destruction? The most common method is to type the token into the black hole address. The Eater Address refers to the address where the private key is lost or the private key cannot be determined. These addresses are just like black holes. They can't be entered. It is almost impossible for any Token to go to the black hole address. The market is circulating.

The following are the more famous Bitcoin, Ethereum Black Hole addresses:

Bitcoin Black Hole Address: 1BitcoinEaterAddressDontSendf59kuE

Ethereum Black Hole Address: 0x0000000000000000000000000000000000000000

As of today, the bitcoin black hole address mentioned above has about 13.2 BTC, and the Ethereum black hole address has about 7780 ETH.

Seeing so many coins, don't you know if you have a heart? Someone may ask, can I crack and "steal" the coins inside?

We know that the private key generates the public key, and the public key generates the address, but the address cannot be reversed to push the private key. To "steal", you can only brute force, that is, take the private key one by one. In the article " How high is the security of Bitcoin ", the vernacular blockchain introduces the difficulty of brute force cracking:

In a bitcoin private key set that is more than 10 times the number of sands of an earth, one by one, cracking out the private key corresponding to an address is harder than finding a needle in a haystack.

That's why the above mentioned Token hits the black hole address and it is almost impossible to turn it out and enter the market.

So why do you want to destroy tokens? The main reasons are as follows:

1. The project uses the PoB consensus mechanism. PoB (Proof of Burn), the burning proof mechanism, proves the user's investment in the network by destroying the cryptocurrency, thereby obtaining the right to “mining” and verifying the transaction. The more you burn (destroy), the greater your (virtual) computing power.

2. Reduce the amount of liquidity and thus increase the value of Token. When the supply and demand relationship affects the price, if the other conditions remain unchanged, the supply will decrease and the price will rise. Some projects will reduce the amount of circulation in the market by destroying tokens, thereby adding value to tokens. For example, currency security and fire coins will periodically destroy a portion of platform currency.

In addition, there are other reasons for token destruction, such as user misuse or intentional credit to black hole address, or the default Gas burn address of some project smart contracts.

Do you think there is a necessary connection between token destruction and price increases? why? Feel free to share your opinion in the message area.


Author | Li Huohua produced | vernacular blockchain (ID: hellobtc)

『Declaration : This series of content is only for the introduction of blockchain science, and does not constitute any investment advice or advice. If there are any errors or omissions, please leave a message. You are not allowed to reprint this article by any third party without the authorization of the "Baihua Blockchain" sourced from this article.