Cryptocurrencies such as Bitcoin, Ethereum, Litecoin and others are similar to regular money. You can use them to pay for goods orservices (though not in Russia, where from January 1, 2021years, payment with cryptocurrency is prohibited by law), they can be stored for a rainy day, or invested in. For example, people sometimes invest rubles in dollars or euros in order to preserve their funds in the event of a fall in the value of the national currency.
But digital currencies, unlike conventional fiat currenciesmoney, there is one important property - they are protected from inflation. This means that over time, coins do not depreciate, but, on the contrary, become more valuable. Projects use different methods for this. One of them is the burning of tokens.
What is incineration?
The name speaks for itself - cryptocurrency developers destroy some of the coins and thus reduce their number in circulation. As a result, they become more scarce and more expensive.
Thus, projects protect coins from depreciation and reward those who are ready to buy and hold the asset as long as possible, becauseburning creates an artificial shortage of coins, accordingly, their cost increases. For example, at the end of February, the Crypto.com project burned 70 million coins, and the value of the token reached an all-time high.
In the stock market, companies use buybacks for these purposes. They buy up their own shares and withdraw their turnover.
How it works - an example from life
To understand how combustion works,compare a token to a postage stamp. Every year the Russian Post issues a set of collectible stamps. Each stamp from this set exists in multiple copies. They are bought up by philatelists for collections.
Now imagine that in the warehousethe printing house of Goznak, where the stamps are printed, there was a fire that destroyed almost the entire issue. Only a test sheet survived. The cost of the surviving stamps will skyrocket, and philatelists will fight each other for life and death in order to get them into their collection.
Orange and blue Mauritius are among the rarest brands in the world. The cost of such a brand reaches $ 20 million. Source: Wikipedia
The example is slightly exaggerated, but the essence does not change: burning tokens creates a shortage and excitement.
Who burns tokens?
Most often, coins are burned by projects with unlimited emission to prevent depreciation. Ripple and Stellar use burning to maintain the value of their coins.
Cryptocurrency exchanges also like to get rid ofown tokens. A striking example is Binance’s native token, binance coin (BNB). When creating the coin, the developers decided that 200 million BNB would initially be issued, but then the emission would gradually decrease to 100 million. For this purpose, the exchange spends 20% of its profits once a quarter on the redemption and subsequent destruction of tokens.
What should you pay attention to?
Theoretically, burning tokens leads to higher pricesfor the remaining coins in circulation. In practice, this only works if the token is in demand on the market and the project has a good reputation.
If we continue the comparison with mail, it is unlikelyconsumers will be very concerned if the circulation of the mailing envelopes burns out. It's just that the mail will incur losses. It's the same with tokens: an unknown project will not achieve an increase in the value of the coin, because people initially do not see value in it.
Where is it more profitable to buy cryptocurrency? TOP-5 exchanges
For a safe and convenient purchase of cryptocurrencies with a minimum commission, we have prepared a rating of the most reliable and popular cryptocurrency exchanges that support deposits and withdrawals of funds inrubles, hryvnias, dollars and euros.
The reliability of the site is primarily determinedtrading volume and number of users. By all key metrics, the largest cryptocurrency exchange in the world is Binance. Binance is also the most popular crypto exchange in Russia and the CIS, since it has the largest cash turnover and supports transfers in rubles from bank cardsVisa / MasterCardand payment systemsQIWI, Advcash, Payeer.
Especially for beginners, we have prepared a detailed guide: How to buy bitcoin on a crypto exchange for rubles?
Rating of cryptocurrency exchanges:
| # | Exchange: | Website: | Rating: |
|---|---|---|---|
| 1 | Binance (Editor's Choice) | https://binance.com | 9.7 |
| 2 | Bybit | https://bybit.com | 7.5 |
| 3 | OKEx | https://okex.com | 7.1 |
| 4 | Exmo | https://exmo.me | 6.9 |
| 5 | Huobi | https://huobi.com | 6.5 |
The criteria by which the rating is set in our rating of crypto-exchanges:
- Work reliability— stability of access to all functions of the platform, including uninterrupted trading, deposits and withdrawals of funds, as well as the duration of the market and daily trading volume.
- Commissions– the amount of commission for trading operations within the platform and withdrawal of assets.
- Feedback and support– we analyze user reviews and the quality of technical support.
- Convenience of the interface– we evaluate the functionality and intuitiveness of the interface, possible errors and failures when working with the exchange.
- Platform Features– availability of additional features — futures, options, staking, etc.
- final grade– the average number of points for all indicators determines the place in the ranking.
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