Sinkholes are mechanisms in the game that keep the gold inflation and item inflation in check, places where basically you either spend gold or destroy items to keep them as something rare, if no such sinkholes exists there will only be more and more items and even legendary items become worthless

A sinkhole in most games is the ability to decompose items in their parts, this way you can destroy weapons and get materials, and even if you use those materials a little portion of the materials will be lost everytime you go through this process