Hi, steemians,
It is the last week of the engagement challenge for season 5 and I'm so delighted to also be among those taking part in the contest. You will all agree with me that the season 5 engagement challenge has been an amazing one because of the variety of contests hosted by the different communities selected and the crypto academy community is not an exception.

This week we are looking at a very interesting contest with the title Token Burn. This is a very important topic that should be known by all crypto lovers. I will be presenting my understanding of this topic by answering the questions given in the contest. Let's get started.

When we talk about the word token burn, we are referring to a situation where some portion of a given token is sent to a dead wallet where the token can not be transferred out again i.e the token sent to this dead wallet is locked up completely thereby reducing the number of the token from circulation.

Wallets in crypto trading are a placeholder for tokens. Every token we are having today stays in a wallet. For the token to still be tradeable, it must be sent to a live wallet. Now let me explain the difference between a dead wallet and a live wallet. A dead wallet is a wallet that has only a public address which means that it can only receive tokens but can not send out tokens whereas a live wallet is a wallet that has both public and private keys I.e it can receive and send tokens.

Sending these tokens to a dead address as I have said earlier is what we call token burn. This is done to reduce the number of tokens in circulation. This process is done because the value of the token needs to be maintained over time. We all understand the law of demand and supply. If the demand for a particular token is high, the value of the token will appreciate whereas if the supply of a particular token is high, the value of such a token will depreciate.

Token burn is aimed to reduce the supply of the token and increase the demand. For example, if we have a limited supply of HP laptops in the market and everyone in a given organisation is told to buy an HP laptop as a criterion to continue his or her work in the company, you will see that the price of the HP laptop will increase instantly because the demand is very high and the supply is limited. In the same way, if we have too many Lenovo laptops in the market, the price of Lenovo laptops will be lesser than every other product because they are much in the market.

Deliberately sending a portion of the token to a dead wallet where it is permanently locked. Anytime you send a portion of a token to a dead wallet, it is said that you have carried out a token burn because the asset will be locked up completely.

Another way token burn is carried out is that the network involved will remove some portion of the transaction fee generated by the network and then burn the portion to maintain the value of the token. An example of this type of burn is seen in the Ethereum network.

Some networks also seek users to give out some portion of their assets to be burnt. In this case, the amount that the users have set out to be burnt will automatically be deducted from their wallet and then sent to the dead wallet address. In some cases, another form of reward is given to users who participate in this exercise to encourage everyone to be part of the growth of the token by burning some portion of the token they have. An example of a place where this method is adopted is the Binance network.

There are many benefits associated with the burning of tokens and that is the reason it is encouraged by every crypto network. Some of the benefits can be seen below.

Reduce the number of tokens in circulation: One of the major reasons why the token is been burnt is to reduce the number of the tokens in circulation. Reducing the number of tokens makes the supply of the tokens limited and it will help to increase demand since the token will no longer be much in the exchange market.

Increase in the value of the token: Since the token has a limited supply, and the demand for it gets higher, the price or value of the said token will also increase significantly. When the token has a higher value it is easily marketed because it gets to the masses quickly since it will be among the trending tokens.

Brings in Investors: After reducing the supply of the tokens, the price or value of the token will appreciate and that will lead to bringing in more investors into the project. Everyone wants to invest in a project that can stand the test of time and that is the reason why the burn steem is done to improve the value of the token so that investors will have more confidence in the said project and also participate in it.

Blockchain burns its token in other to reduce the number of tokens in circulation and also increase the value of the said token. Some blockchains burn their token using the auto-burn mechanism while others do theirs once in a while. The burning of the token helps to preserve the value of the token of that blockchain.

When a blockchain carries out the burning exercise, its major aim is to see that they reduce the amount of the said token in circulation which means that supply will become limited and the demand for the asset will become even higher. With the higher demand for the said token, the project will attract more investors and which will make the project more popular and the value of the token will continually raise.

I will be taken into consideration the BNB Chain token burn and then analyse the outcome of the burning exercise. The BNB token burn is carried out quarterly to reduce the amount of BNB in circulation thereby increasing the demand for the asset and reducing the supply.

BNB is the native token used for transaction purposes I.e payment of transaction fees in the Binance exchange platform. Every quarter, some portion of BNB is destroyed using the below address. 0x000000000000000000000000000000000000dEaD

In October 2021, after the burn of the BNB token, the price of the token raise from about $305 to about $480. This is seen as one of the greatest impacts that the burning of tokens has on the tokens that are left unburnt. So this is the reason why most blockchains burn their tokens it helps to push the prices significantly to entirely new levels.

This burning process will continue until the BNB token left is about 100 million before binance will stop burning tokens. Currently, a total of about 38,683,447 BNB have burnt already. And the total that binance is planning to burn is 50% of the entire BNB token which is also about 100 million BNB.

The burnsteem25 is an initiative in the steemit platform where all authors are encouraged to set at least 25% of their payout or rewards to @null. This is a dead wallet address created in the steem blockchain to help burn steem tokens. As we have discussed earlier, burning tokens aim to reduce the number of token in circulation also making the demand high and increasing their value.

As it stands now, every steemian is encouraged to always set at least a 25% reward to @null to also help reduce the number of steem that goes out of the steem blockchain into the exchange market. It is in this regard that more support is given to those who support this initiative and they are also advised to use the tag #burnsteem25 to get noticed.

Every steem sent to this address gets destroyed completely. I checked the wallet address of @null and I notice you will only see the history that you have received a particular amount of steem or SBD from a user but that amount doesn't add up to the wallet balance. It means as the token is going in it is destroyed immediately.

The case of the steem token is not different, with the help of the burnsteem initiative, the number of steem token that enters the exchange markets has reduced drastically. This also has helped to improve the price of the steem token. Though steem does not have a maximum supply because of the new creation of steem every day.

So I think with the burnsteem initiative, the value of steem will appreciate with time. This is because the number of steem that gets to the authors who support this initiative always reduces by 25% and goes to @null and with that the amount of steem going to external exchange has also reduced.

Token burn is a process of sending some portion of the token into a dead wallet where it will be permanently destroyed since it only has a public address without a private key. The burn token initiative is carried out to reduce the number of that token in circulation and thereby making the token scarce. This way the demand will be high and the value will also increase.

The burnsteem25 initiative used on the steemit platform is another means by which we destroy the steem token by sending 25% of our earnings to @null. With this, we expect that the price of the steem token should appreciate in return.