cryptocurrency burning – Forex Academy

Introduction

In the nineties, when the internet was evolving, it sometimes used to take hours to connect to the internet. When the visionaries were betting on the internet that it would change the world, most of them wondered if it has that transforming effect? Now we cannot imagine a world without the internet. The same is going to happen with blockchain. Blockchain is going to create the internet of value. To build that work, we need developers in blockchain, and different languages used in developing the technology.

To understand which languages should be used in blockchain coding, let us see the challenges the tech offer to understand and select a language for development.

✰ Security

If we talk about public blockchains, the code is open source and public. Anyone can check the code, find vulnerabilities, and take away millions in dollars. Hence the development is very slow in general.

✰ Resource Management

Networks grow in size pretty soon, and hence the maintenance should be appropriate. Local queries should be addressed at the earliest.

✰ Performance

The language chosen should be extremely versatile. Blockchain has specific tasks that can be checked parallelly while some cannot. Signature verification can be checked parallelly, while transaction verification should be done to avoid double-spending.

✰ Deterministic behavior

A smart contract should behave in the same way, no matter in which machine you run them. In the same way, a transaction should hold good at any point in time. Hence, they should operate in Isolation. Hence, we should isolate smart contracts and transactions from non-deterministic elements.

Let us see the languages which overcome these challenges below:

C++

The bitcoin blockchain is written in C++. C++ has been developed as an extension of the C language, and it is an object-oriented language (OOP). OOP means, when an object is created with functions and data, it can be called upon for use any number of times further, thus reducing coding time. Let see the features of C++ below, which aides in blockchain coding.

Memory

C++ takes complete control over CPU and memory usage. We have seen that blockchain requires effective resource management and the platform itself to integrate with lots of untrusted endpoints still giving quick service.

Threading

A thread is a set of instructions that can be executed simultaneously. C++ not only supports multithreading but also optimizes single-thread performance. As we discussed before, blockchain needs both parallel and non-parallel tasks to be performed; hence threading functionality helps in this requirement.

Move Semantics

Move Semantics helps in getting copies of particular data only when required. This reduces data redundancy and boosts performance.

Code Isolation

Code isolation is possible in C++ due to its usage of classes. The language itself is so mature that it is frequently updated, which helps use the latest features.

Solidity

The most common language used in Ethereum to write smart contracts is Solidity. Anyone interested in developing DAPPs or get into the ICO games, Solidity, is a must learn. Most of the Ethereum founders contributed to the development of Solidity. Solidity is a slimmed-down language explicitly designed to develop smart contracts with a syntax very similar to Javascript.

Python and Javascript are used as well in blockchain coding as they have the required properties as well. Go Lang, developed by Google, is used as well due to its faster speeds. The need for blockchain developers is very high, and going forward will only increase. Hence, for programmers, if they can learn what blockchain is, they have a high tide to ride and make their name in the blockchain world.

Token burning, a concept unique to the cryptocurrency market, is gradually becoming an intrinsic feature of newer and future cryptocurrency projects. Even more recently, well-established altcoins such as Binance have adopted this concept making it worth the attention of any cryptocurrency investor.

As the name suggests, coin/token burning is the process of ‘burning’ coins, or rather, the irreversible destruction of coins/tokens in an effort to eliminate them from circulation.

To understand this concept better, let’s delve into how the whole ‘burning’ process works.

How Does Token Burning Work?

Despite the extreme image the phrase paints, token burning doesn’t involve any kind of token disintegration. In fact, it’s impossible to disintegrate coins since blockchain – the underlying cryptocurrency protocol – is immutable, meaning the protocol’s history and data cannot be altered in any way.

What actually happens is that the coins/tokens are algorithmically taken out of circulation by sending their signatures to a public address known as an ‘eater address.’ The keys to this public address are private and cannot be obtained by anyone. In essence, it means that once the tokens are sent to this address, they are unrecoverable and can never be used. Ever!

All burnt coins/tokens are then recorded on the blockchain transparent ledger system for all nodes to see and confirm that the coins have been indeed destroyed.

While token burning serves the same purpose, which is the elimination of coins from distribution, it differs in the scope of execution. For instance, some projects will execute a one-time burn after their Initial Coin Offering (ICO), to help eliminate any unsold tokens. Other projects favor periodic burning of tokens based on the token’s utility and size, among other variables. Binance coin (BNB), for example, burns its tokens quarterly, with an aim to reach a threshold of 100 million BNB burned tokens. Alternatively, project developers can buy back their tokens from exchanges and take them out of circulation by sending them to the ‘eater address.’

A few other coins, such as Ripple, burn token progressively with each transaction. When parties transact using the coin, they must incur a transaction fee, pretty much like sending Bitcoin to another BTC wallet. However, in the case of Ripple, the transaction fees aren’t awarded to miners. Instead, these fees are automatically burned.

Why do we need to burn tokens?

It’s quite startling to understand why crypto projects burn their precious tokens. But the process comes with its own benefits, favoring not only the developers but also the coin users. Here are the main motives behind token burning;

☑️Increase the Value of Coins

The most common reason behind token burning is to boost and encourage the growth of a coin’s value. Going by the economic laws of demand and supply, reducing the supply of a commodity in the market fuels the demand for that particular project. As such, by burning a token, the supply of a coin reduces in equal measure, prompting a demand of the coin since there is a lesser amount of coins to satisfy the people’s demand. Consequently, the price of the coin appreciates, stabilizing its value.

To the investors, the growth in value encourages them to hold the coins for longer in anticipation of even better prices as the demand increases. Also, holding the coins for longer helps maintain a sound network bandwidth, which is beneficial to the developers.

☑️Provision of Dividends

The provision of dividends is closely tied to the resultant increase in coin value after burning. However, this benefit works best in security tokens rather than in their utility counterparts.

A security token is classed as an asset, and thus those holding it are regarded as investors. This is not the case with utility tokens.

Nonetheless, with the increase in a coin’s price after burning some of them, the developers indirectly reward the coin holders, since the value of the asset has appreciated. This move plays out perfectly in countries such as the USA, where cryptos are discouraged from handing out dividends directly to their token holders.

☑️Protection Against Spam

All cryptocurrencies are under the computing realm, which makes them vulnerable to cybersecurity threats. Having this in mind, it’s easy to understand why tokens can fall victim to Distributed Denial-of-service attack (DDOS), especially with the growing number of cryptocurrency users.

Basically, DDOS is a cyber-attack in which the perpetrator seeks to flood a system with an influx of requests, so as to prevent the execution of some or all legitimate requests.

In the same vein, a DDOS attack on token targets at clogging the network, preventing the execution of transactions. By burning tokens, the developers end up reducing the overall transactions to a manageable number, thus safeguarding the network from DDOS attacks and spam transactions.

Ripple is a perfect demonstration of how coin burning prevents spamming. By automatically burning a portion of the transacted amount, Ripple discourages the need to overload the network to gain a quick profit.

☑️Correct Errors

Although in rare cases, sometimes project developers make serious mistakes that can only be corrected by token burning.

For instance, a project may issue an excess amount of coins or experience an increase in the number of tokens as a result of technical errors. In other cases, tokens unfit for trading. For example, those meant to support a transaction may end up into public circulation. Theoretically, an increased supply translates to lower demands, plummeting the coin prices.

As a corrective measure, the excess tokens are burnt to avoid some of the consequences brought by the errors incurred.

☑️Build Trust and Loyalty

Gaining trust from coin holders is the ultimate goal of any cryptocurrency, particularly one that is new in the market.

After the Initial Coin Offering (ICO) of new crypto, its price is bound to increase. The project developers may decide to make more profits by selling excess coins to exchanges, at the prevailing spiked prices, which is unfair. More so, by selling the excess coins, it would lead to allegations that the developers are only committed to gaining profits and that their coin has no real value.

However, burning the excess coins shows that the developers are committed to the long-term growth of the coin. As such, the funds raised from the ICO will be used for business operations. But most importantly, burning excess coins help decentralize the project.

Conclusion

As hardcore as it may sound, token/coin burning is proving to be an effective method of maintaining a balanced crypto-ecosystem. With time, future cryptocurrencies will certainly adopt this mechanism giving its numerous benefits, especially in a coin’s infancy stage.

Also, with the hope that cryptocurrency space will stand the test of time, coin burning is arguably the best bet to maintaining the long-term value of a crypto.