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Well-known Cryptocurrencies use a method to keep their market value high. It is also an attempt to offset inflation. This is called Coin Burning. That means when a sizable quantity of a coin’s supply is extracted, that coin encounters a heightened demand resulting in the price of the coin rising.
There are a few different coin burn strategies being used and since most coins are experiencing similar price changes, it’s difficult to determine which strategy is receiving better results. The different approaches being used are explained below.
Numerous cryptocurrencies burn coins that are in circulation. This means they remove coins that are being traded or held by investors. In this case, the company that issues the cryptocurrency buys it back from the coin holders and exchanges.
Binance does this a few times a year. It’s 7th coin burn eliminated 830,000 BNB or $16 Million this way. VeChain and Tron use a model resembling Binance also. One distinct advantage of the strategy is that the size of the burn is mostly determined by market forces and price action.
Occasionally the practice is to remove coins that are not in supply, meaning coins that are allocated to team members, early investors, even the project itself. For example, EOS burned an account containing 34 million EOS which equates to $150 million following a community vote.
In all probability, it’s easy to burn large amounts of funds like this, as the funds in question are usually located in just a few large accounts. But since these coins are not in general circulation, this type of burn doesn’t have an effect on the market or price.
Burning coins during every transaction is another model some cryptocurrencies use. VeChain burns 70% of its VTHO tokens which are used to pay for transaction fees. Notably, VTHO tokens are not VeChain’s primary VET coin. That gets burned via buybacks.
Ripple follows a similar strategy. It burns about 0.5 XRP per minute, which adds up to more than 250,000 XRP per year (this is subject to change). This strategy has a few things in its favor. It’s very easy to coordinate, and it shouldn’t have any unexpected results since it plays out slowly.
By spreading small burns across many transactions, this strategy should prevent any short-term market cap drops. It should also reduce confusion and misunderstanding among investors, thereby preventing secondary effects such as “panic selling” and other irregular activity.
Bitcoin and Ethereum are not issued by a central organization or project. These coins are mined by a community, so there is no group capable of planning an official coin burn. Instead, rules and algorithms prevent too many tokens from being created in the first place.
With that said, wealthy groups can take it upon themselves to carry out a burn. Antpool, a popular mining pool, began to burn Bitcoin Cash transaction fees in 2018. There was some controversy though, and plenty of disagreement over whether this was a legitimate way to boost Bitcoin Cash’s value.
Coins can also be destroyed inadvertently. This occurs whenever individuals lose access to their wallet addresses. There are estimates that suggest that up to 3.8 million BTC has been permanently lost. Even if this is accidental, it is effectively the same as burning 20% of Bitcoin’s supply.
Tether and other stablecoins have fine-tuned their burning strategy so as to achieve a specific price. These types of cryptocurrencies continually burn and also create tokens resulting in the price of the stablecoin is always around the $1.00 mark.
This model isn’t generally applicable to other sovereign cryptocurrencies. Tether relies on the U.S Dollar as collateral. This allows it to achieve stability. The full process is quite complex, however, Tether’s coin burns fundamentally reflect the fact that U.S. Dollars are moving out of its reserves.
What this means is that the coin burns do not dictate, but reflect Tether’s stability. This being the case, most cryptocurrencies cannot target prices as accurately as stablecoins do. But even stablecoins experience minor price fluctuations as their burns cannot always contend with market activity.
I believe it’s safe to conclude coin burns are not harming crypto prices. I think the organizations relying on coin burns would cease the practice if it had any negative results. But so far they have stuck with their strategy since the beginning.
So there you have it. There are a number of different ways in which certain cryptos are attempting to keep their currency deflationary and increasing the value. Markethive has another unique system that will stimulate great results for its holders of MHV (Markethive Coin)
Markethive has a Consumer Coin. (MHV) There is great Purpose and a complete Ecosystem of products and services built around this coin. The Markethive Coin is being utilized within the Markethive Exchange via Infinity Airdrops, faucet systems, and bounty programs that reward the user for any and all activity on the platform. Furthermore, MHV can be used to buy products and services within the Markethive environment from individual sellers and the company itself. So the coin is used within the commerce of the system creating an eternal economic velocity.
The Markethive Coin is not dependent upon speculative value as is the case with many other cryptocurrencies and platforms and is a fundamental difference to the other systems out there. The Markethive system has been developed to produce revenue in the traditional sense with the added benefits of the blockchain taking it to the next level. The revenue is a vehicle that is used to buy the Markethive Coin back in the free market so it can be redistributed into the economic vortex of the system.
Another portal that will be implemented in due course is designed to burn the coin. This is a good thing and will be extremely valuable to all associates in Markethive. To burn the Markethive Coin means pulling it out of the marketplace, so there’s less supply. The less supply, the greater the demand, which in turn increases the price of the coin. Piqued your interest?
More information about this will be delivered as and when it comes to hand. To keep up to date with the progress of Markethive and the ingenious implementations that will benefit all of us, join us at the weekly meetings held on Sunday Mornings at 10 am MST. These meetings are hosted by the CEO, Thomas Prendergast, and CTO, Douglas Yates. The link to the Markethive Zoom Room can be found in the menu at the top of your markethive home page under Calendar.
Attendance at the live meetings (which, by the way, are not recorded) is constantly improving, however, as Thomas stated in last week's meeting if we can get 100 people to this week's meeting (Sept. 8th 2019) he will reward every single person that attends 100 MHV. Now that's a great incentive! See you there!
As passionately reiterated by Thomas Prendergast,
“Everyone in Markethive is going to prosper and become wealthy because of what we are doing. Early adopters will obviously have a really big head start, but this is going to continue on for every single person, even if they join up in 10 years from now. Markethive will always be built on the premise that nobody gets left behind.”
The future is bright for us as Markethive takes all the steps to ensure the long-term sustainability of the Markethive Ecosystem. The MHV Coin will inevitably increase in value, securing your success and prosperity within the realms of Markethive and beyond.
Deb Williams
Market Manager for Markethive, a global Market Network, and Writer for the Crypto/Blockchain Industry. Also a strong advocate for technology, progress, and freedom of speech. I embrace "Change" with a passion and my purpose in life is to help people understand, accept and move forward with enthusiasm to achieve their goals.
