// GLOSSARY -- BLOCKCHAIN & CRYPTO FUNDAMENTALS
What is Token Burn?
Token burning is the permanent removal of tokens from circulation by sending them to an unspendable address — reducing total supply and potentially increasing scarcity and value of remaining tokens.
WHY IT MATTERS
Burning is crypto's deflation mechanism. Tokens sent to a burn address (like 0x000...dead) can never be spent — they're permanently removed from circulation. This reduces total supply.
Burn mechanisms include: EIP-1559 base fee burning (ETH), buyback-and-burn (protocol uses revenue to buy and burn its token), and tax burns (a percentage of each transfer is burned).
When burn rate exceeds issuance, a token becomes deflationary. ETH is deflationary during periods of high network activity when the EIP-1559 base fee burn exceeds staking issuance.
FREQUENTLY ASKED QUESTIONS
Why burn tokens?
To create scarcity and potentially increase value. Burns signal that token supply decreases over time, making each remaining token represent a larger share.
Is ETH deflationary?
Sometimes. When network activity is high (base fee burn > issuance), ETH supply decreases. During low activity, issuance exceeds burns and supply increases. It fluctuates.
Where do burned tokens go?
To a burn address that nobody controls. Common burn addresses: 0x000...000 (zero address) or 0x000...dEaD. Tokens there are verifiably unspendable.