BURNING
The term “burned” refers to coins being permanently removed from circulation; burning is a supply mechanism that enables coins to be taken out of circulation, hence acting as a deflationary tool and increasing the value of each other coins in the network (this concept, if you’re familiar, is much like company buybacks in the stock market). Burns are usually performed by the team and project behind a cryptocurrency to drive the price upward through deflation. Burning can be done in several different ways: one of these ways is by simply sending the coins to an inaccessible wallet, which is called an “eater address.” In this case, while the tokens haven’t technically been removed from the total supply, the circulating supply has effectively gone down. Currently, around 3 million Bitcoins (200+ billion of value) have been lost through this process.
Tokens can also be burned by coding a burn function into the protocols that govern a token, but the far more popular option is through the mentioned eater addresses. As with halving, (immediately below) scarcity creates value, and burning increases scarcity and, as a result, value.
HALVING
Halving is a supply mechanism that governs the rate at which coins are added to a fixed-supply cryptocurrency. The idea and process were popularized by Bitcoin, which halves every 4 years. Halving is set in motion by a programmed reduction in mining rewards; block rewards are the rewards given to the miners (really, the computers) that process and validate transactions in a given blockchain network. From 2016 to 2020, all the computers (called the nodes) in the Bitcoin network collectively earned 12.5 Bitcoin every 10 minutes, and that was the number of Bitcoins entering circulation. However, following May 11th , 2020, the rewards dropped to 6.25 Bitcoin per the same timeframe. In this way, for every 210,000 blocks mined, which equates to roughly every four years, the block rewards will continue to halve until the max limit of 21 million coins is reached around the year 2040. Thus, halving is likely to increase the value of Bitcoin and other cryptocurrencies by decreasing supply while not altering demand. Scarcity, as mentioned, drives value, and limited supply combined with growing demand creates greater and greater scarcity. For this reason, halving has historically driven the price of Bitcoin up and will likely be a long-term growth catalyst. This concludes the basic cryptocurrency analysis.