Token burn is a cryptocurrency term used to describe the process of removing a number of tokens permanently from circulation by transferring the tokens to a burn address (or burn wallet) where it can never be retrieved. ^[1]
The purpose of token burning can vary, but it is often done to reduce the total supply of a cryptocurrency or token, which can have implications for factors like scarcity and value.

Overview

Token burning refers to the deliberate reduction of the total supply of a cryptocurrency by removing a certain quantity of tokens from circulation. This process often entails transferring these tokens to a wallet that has unknown private keys. Consequently, this wallet is solely capable of receiving assets, rendering the burned coins or tokens effectively inaccessible and permanently reducing the overall supply. ^[1][2] This deliberate reduction of a coin's total supply is intended to potentially drive an increase in the value of a particular digital asset through increased market demand.[3]

The process of crypto burning can be integrated into a project through various approaches, including automatic and built-in mechanisms, a one-off event, or scheduled routine maintenance.^[3]

The choice to initiate crypto burning may be documented in a project's whitepaper before its launch, explicitly detailing the intention to gradually reduce fractions of its supply over time. Alternatively, the decision to burn crypto could be subjected to a community vote, allowing the decentralized autonomous organization (DAO) to collectively determine whether or not to proceed with the burning process.^[3]

Token Burn Examples

Ethereum(ETH)

Ethereum has adopted burning mechanics as a strategy to facilitate the migration of users from its previous proof-of-work (PoW) network to its new proof-of-stake (PoS) network. Through the implementation of EIP-1559, an update launched in August 2021, Ethereum is able to burn a portion of the Ether tokens collected as transaction fees during the process of verifying transactions on the network.^[6]

Shiba Inu(SHIB)

Another example of a cryptocurrency implementing a burn mechanic is the meme coin Shiba Inu (SHIB). In April 2022, the developers of Shiba Inu introduced the SHIB Burning Portal, which offers participants the option to burn their SHIB tokens. In return for burning their SHIB tokens, individuals receive another token called burntSHIB. This token, in turn, provides rewards in the form of the ERC-20 token RYOSHI.^[6]

Binance(BNB)

Beginning in 2017, cryptocurrency exchange Binance initiated a practice of conducting quarterly burns of its Binance Coin(BNB). The exchange has pledged to continue these burns until approximately 50% of the total supply of BNB has been withdrawn from circulation.^[8] Binance Coin incorporates a burn function that allows any cryptocurrency holder to execute it with ease by specifying the number of coins they wish to eliminate from their wallet. The process involves a smart contract initially verifying if the required coins are available in the holder's wallet. Once confirmed, the specified coins are subtracted, and the total count of coins in circulation is automatically adjusted.^[2]

BNB Chain has completed its 24th and third quarterly BNB burn in 2023. The burn includes the Auto-Burn as well as the Pioneer Burn Program. Here are the facts and figures from the latest burn as of July 2023:^[9]

• Auto-Burn (Total BNB burned): 1,991,854.33 BNB

• Approximate value in USD: ~$484,160,000

• Transaction ID (TXID) for BNB burn: View transaction

• BNB burned from the Pioneer Burn Program: 747.51 BNB

• Real Burn (Auto-Burn - Pioneer Burn): 1,991,106.82 BNB

BNB Real-Time-Burn
The network will burn a fixed ratio of each block’s gas fees based on BEP-95 that validators collect. The exact ratio will be determined via BSC’s governance mechanisms. The burns will take place even after BSC has reached its target goal of 100 million BNB. By reducing the supply of BNB, upwards pressure is placed on the coin’s price. The Binance Evlution Proposal (BEP) may also decrease the amount of BNB delegators and validators received. However, with upward price pressure, the fiat value could also increase, offsetting any reduction in coins.^[10][11]

BNB Auto-Burn
The BNB Auto-Burn provides an independently auditable, objective process. The figures are reported quarterly, and the mechanism is independent of the Binance centralized exchange. On top of that, BNB Chain continues to burn a portion of BNB Chain’s gas fees in real-time using the Real-Time-Burn mechanism. 

BNB Pioneer-Burn
The Pioneer Burn Program also permanently removes an amount of BNB from circulation equal to provable lost funds by eligible BNB Chain users. This number is then counted towards the total quarterly burn figure.
When it comes to the Pioneer Burn, BNB Auto-Burn, and Real-Time-Burn (BEP95) mechanisms, everything has stayed the same as in the 23rd BNB burn. Tthese are transparent and independently verifiable.

Advantages

The aim of token burning is to establish price stability and enhance investor confidence. When demand stays consistent, the reduction in the overall supply of a coin can result in higher prices. Through periodic or transaction-based cryptocurrency burning, many altcoins can progressively augment demand over time.^[2]

Disadvantages

One of the notable drawbacks of token burning is that it might have a limited impact on price when dealing with small quantities. For instance, considering the vast number of Shiba Inu (SHIB) coins in circulation, which exceeds 589 trillion, burning a small number of $SHIB tokens would not significantly influence the overall supply. Nonetheless, it is worth noting that the community has collectively burned over 263 billion $SHIB tokens since October 2021, accounting for approximately 0.05% of the total circulating supply.^[2]