In the world of cryptocurrency, SHIB tokens have received widespread attention due to their unique community culture and economic model. With the launch of Shibarium, ShibTorch, the burning mechanism of SHIB tokens, has brought new opportunities and challenges to holders. This article will delve into the SHIB token burning process and its impact on the overall ecosystem.
The meaning of burning tokens
The process of burning a token is to remove the token from circulation, usually by sending it to a public address that can only receive but cannot be spent. This address is called a "burn address". This method is the most common way to remove a token from circulation, as it effectively removes the token from the market permanently.
Why do you need to burn cryptocurrencies? The main reasons for burning cryptocurrency are as follows:
Inflation Control: For those inflationary supply models that continuously create new tokens, burning can act as a deflationary mechanism to help balance or reduce the rate of inflation.
Reducing supply: By reducing the total supply, the remaining tokens may increase in value due to supply and demand principles, which is beneficial to holders.
Incentives to Hold: Burning tokens can incentivize holders to keep their tokens rather than sell them because they expect the value of their tokens to increase over time.
EIP-1559: Basic Fees vs. Priority Fees
EIP-1559, or Ethereum Improvement Proposal 1559, is an important upgrade to the Ethereum network fee mechanism and was implemented with the London hard fork on August 5, 2021. Its main goal is to improve user experience with transaction fees, make the fee market more predictable, and reduce gas fee volatility.
EIP-1559 introduces a new concept - the base fee, which is the minimum gas fee that must be paid in order for a transaction to be included in a block. The base fee will be automatically adjusted based on network congestion. When the network is busy, the base rate goes up; when the network is less congested, the base rate goes down. This makes the fee system more predictable, helping users more accurately estimate transaction costs.
By making transaction fees more predictable, EIP-1559 helps users avoid overpaying for transaction fees and reduces the frustration associated with fee estimates. Additionally, base fees are burned, which effectively removes a portion of transaction fees from circulation, introducing deflationary properties to Ethereum. This burning mechanism is designed to reduce the total supply of ETH over time, potentially increasing its value.
In addition to the base fee, users can optionally include a priority fee, also known as a tip, to incentivize miners to prioritize their transactions. Priority fees are paid directly to miners, enabling faster inclusion of transactions during periods of high demand.
ShibTorch combustion process
Shibarium’s burning hard fork implements features of EIP-1559 and enables our own burning mechanism: ShibTorch. This mechanism not only effectively burns tokens, but also injects new vitality into the SHIB token ecosystem.
How ShibTorch works: ShibTorch works similarly to EIP-1559 and aims to reduce the supply of SHIB tokens by burning them. Specifically, ShibTorch will automatically burn a portion of SHIB tokens in each transaction. This process can not only reduce the supply of SHIB in the market, but also promote the increase in the value of SHIB tokens.
The introduction of this burning mechanism provides greater incentives for SHIB token holders to hold onto their tokens rather than sell them. Over time, the value of SHIB tokens will likely increase as supply decreases, which is good news for investors looking to profit in the future.
Summarize
SHIB Token Burning Mechanism ShibTorch plays a vital role in the cryptocurrency ecosystem. By effectively reducing the supply of tokens on the market, ShibTorch not only helps control inflation but also incentivizes holders to hold onto their tokens for the long term. With the implementation of EIP-1559, the burning process of SHIB tokens has become more transparent and predictable, which not only improves the user experience, but also adds more possibilities for the future of SHIB tokens.
In this rapidly changing market, it is critical for investors to understand how the combustion mechanism works. I hope this article can help readers gain a deeper understanding of the SHIB token and its burning mechanism, and make informed choices in future investment decisions.