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Token Burning: Why Crypto Projects Destroy Money
Key Takeaways:
- Burning is the irreversible act of sending cryptocurrency to a "null address" that no one can access.
- Projects utilize token burning to create artificial scarcity, which can theoretically drive up the price of the remaining tokens.
- Mechanisms like EIP-1559 on Ethereum automatically burn a portion of transaction fees to offset inflation.
Token burning is a concept that sounds insane to a traditional banker. Why would anyone intentionally destroy money? In the physical world, burning cash is illegal and illogical.
But in the cryptocurrency economy of 2026, it is one of the most powerful tools for value creation. It acts as a deflationary force, counteracting the inflation of mining rewards.
By permanently removing assets from the circulating supply, a project can reward its long-term holders without actually paying them a dividend. It is the digital equivalent of a stock buyback, but faster and transparent on the blockchain.
How Does the Burning Process Work?
You might picture a digital fire, but the reality of token burning is more technical. To burn a token, you send it to a "Null Address" (also known as an Eater Address).
This is a wallet address that was generated without a private key. Because there is no key, the funds sent there can never be accessed or spent again.
Once the transaction is confirmed on the blockchain, the tokens are subtracted from the total supply. They still exist on the ledger as a record, but they are effectively dead capital.
Why Do Projects Burn Tokens?
The primary motivation is supply and demand. If demand remains steady while the supply decreases via token burning, the price per unit should mathematically rise.
Many exchanges and projects, like Binance with BNB or MakerDAO, use a portion of their profits to buy back tokens from the open market and burn them. This returns value to the investors. If you hold the token, your slice of the pie gets slightly bigger every time a burn happens, simply because the total pie got smaller.
How Does Ethereum Use Burning?
The most famous example of this mechanism is Ethereum. Following the EIP-1559 upgrade years ago, the network began burning a portion of every gas fee paid by users.
During periods of high network activity, token burning on Ethereum can outpace the issuance of new ETH to stakers. This turns Ethereum into a "deflationary" asset. Instead of the supply growing every year like the US Dollar, the supply of ETH can actually shrink, making it scarcer over time.
What Is Proof-of-Burn?
Beyond economics, burning can also be used for security. "Proof-of-Burn" is a consensus mechanism used by some niche blockchains.
Instead of mining with electricity (Proof-of-Work) or locking up capital (Proof-of-Stake), miners demonstrate their commitment to the network by destroying coins. The more they burn, the higher their chance of being selected to validate the next block. It is a way to buy virtual mining power by sacrificing immediate wealth.
Conclusion
Scarcity is the ultimate value driver. Token burning provides a verifiable, transparent way for projects to prove they are committed to protecting the value of their currency.
When you see a project announcing a burn, it is usually a bullish signal for the ecosystem. Register at BYDFi today to trade deflationary assets and spot opportunities on the Spot market before the supply shock hits.
Frequently Asked Questions (FAQ)
Q: Is token burning reversible?
A: No. Once tokens are sent to a null address, they are gone forever. There is no admin key or support team that can recover them.Q: Does burning always increase the price?
A: Not necessarily. Token burning reduces supply, but if demand also drops, the price can still go down. It is not a magic fix for a bad project.Q: Is token burning a taxable event?
A: Generally, no. If a project burns tokens you do not own, it is not a taxable event for you. However, if you receive airdropped tokens that you immediately burn, the rules get complicated depending on your jurisdiction.2026-01-29 · 6 days agoWhat is Tokenomics? A Beginner's Guide to Crypto Supply and Demand
What is Tokenomics? The Science Behind Crypto Value
Why does one cryptocurrency skyrocket to the moon while another, with similar technology, crashes to zero? The answer rarely lies in the logo or the hype. It lies in the Tokenomics.
A combination of "token" and "economics," tokenomics is the study of the supply and demand characteristics of a cryptocurrency. It is the blueprint that dictates how a token is created, distributed, and removed from the ecosystem. For any serious investor, understanding tokenomics is the single most important skill for evaluating a project.
The Supply Side: Scarcity vs. Abundance
The first thing to look at is the supply. This is often where beginners get trapped. They see a coin priced at $0.00001 and think it is "cheap." But if there are 500 trillion coins in existence, that price might actually be expensive.
You need to analyze three key metrics:
- Circulating Supply: The number of coins currently in the market.
- Total Supply: The number of coins that exist right now, including those locked up.
- Max Supply: The hard limit of coins that will ever exist.
The Bitcoin Model (Deflationary): Bitcoin has a hard cap of 21 million. No more can ever be created. This scarcity drives value up as demand increases.
The Dogecoin Model (Inflationary): Dogecoin has no hard cap. Millions of new coins are printed every day. For the price to stay stable, massive amounts of new money must constantly enter the system to buy up that new supply.The Demand Side: Utility is King
Supply is meaningless without demand. Why would anyone want to hold this token? This is where Utility comes in.
If a token has no use case, it is a speculative bubble. Good tokenomics creates a reason to hold.
- Gas Fees: You need ETH to use the Ethereum network. This creates constant buying pressure.
- Governance: Holding tokens gives you voting rights on the future of the protocol.
- Staking/Yield: Users lock up tokens to earn rewards, removing them from circulation and reducing sell pressure.
Asset Allocation: Who Owns the Coins?
Before a token launches, the team decides who gets what. This pie chart, usually found in the whitepaper, reveals if the game is rigged.
- Fair Launch: Most tokens are sold to the public (e.g., Bitcoin).
- VC Heavy: A large percentage is allocated to "Private Investors" or the "Team."
If 40% of the supply is held by early Venture Capitalists (VCs) who bought in at a penny, retail investors are in danger. These whales will eventually want to cash out.
Vesting Schedules and Unlocks
This leads to the concept of Vesting. To prevent a massive crash on day one, early investors and team members usually have their tokens locked for a period (e.g., 1 year).
However, you must watch the Unlock Schedule. When the vesting period ends, millions of tokens are released onto the market simultaneously. This sudden increase in supply often causes the price to dump. Smart traders check the calendar to avoid buying right before a major unlock event.
The Burn Mechanism
Some projects actively fight inflation by Burning tokens—permanently removing them from circulation.
- Transaction Burns: A small % of every transaction is sent to a "dead wallet."
- Buyback and Burn: The project uses its revenue to buy its own tokens off the market and destroy them.
This acts like a stock buyback, increasing the value of every remaining token by making them scarcer.
Conclusion
Tokenomics is the mathematical truth behind the marketing. A project can have the best website in the world, but if it has infinite inflation and massive VC unlocks, the price will likely struggle. Conversely, a project with a fixed supply and high utility is primed for growth.
To analyze these metrics and trade tokens with sound economic structures, you need a professional platform. Join BYDFi today to find the best-structured assets in the crypto market.
2026-01-16 · 19 days agoPOLAND ERUPTS: President’s Shock Veto Sparks a National War Over Crypto Freedom
BREAKING: Polish President Vetoes Landmark Crypto Bill in Stunning Move, Sparking Freedom vs. Chaos Political Showdown
Warsaw, Poland – In a dramatic political maneuver that has thrown the nation's financial future into the spotlight, Polish President Karol Nawrocki has vetoed the highly contentious Crypto-Asset Market Act, branding it a dangerous threat to civil liberties and economic innovation. The veto, announced late Monday, sets the stage for a fierce constitutional clash and has cleaved the Polish political landscape into two opposing camps: one heralding it as a victory for freedom, the other condemning it as an invitation to financial chaos.
The President's Stand: A Defense of Freedom and Innovation
President Nawrocki's veto was not a mere procedural step, but a forceful ideological declaration. His office issued a blistering critique of the bill, which had previously cleared parliamentary approval, framing the decision as a necessary defense of core Polish values.
The President's core objections are threefold:
1- The Draconian Website-Blocking Power: The bill granted authorities sweeping, opaque powers to block websites operating in the crypto market with minimal oversight. "This provision creates a tool for censorship that can be easily abused," the presidential statement argued. It is a direct threat to digital freedoms and sets a dangerous precedent that undermines the openness of the internet in Poland.
2- A Bureaucratic Monster of "Overregulation": The president lambasted the bill's extreme complexity—a dense, sprawling document that critics say only lobbyists and lawyers could love. This is not regulation; this is suffocation, Nawrocki stated. He contrasted Poland's approach with the more streamlined, business-friendly frameworks of neighbors like the Czech Republic, Slovakia, and Hungary, arguing that the bill would achieve one thing only: "Overregulation is the fastest way to drive innovative companies, talent, and tax revenue to Vilnius, Prague, or Malta.
3- Stifling Competition, Killing the Startup Spirit: A particularly criticized aspect was the structure of prohibitive supervisory fees. The president warned that these fees were calibrated to benefit only deep-pocketed foreign corporations and traditional banks, while crushing domestic Polish startups and entrepreneurs. This is a perverse reversal of logic. Instead of fostering a competitive, homegrown market, it kills it in its cradle. It is a direct attack on Polish innovation and ambition, he asserted.
Political Backlash: Accusations of Choosing Chaos
The veto triggered an immediate and furious response from the heart of the government, revealing a deep rift within the ruling coalition.
1- Finance Minister Andrzej Domański took to X with a stark warning: As a result of abuses in this market, 20% of clients are already losing their money. By vetoing this bill, the President has chosen chaos. He must now bear full responsibility for the consequences. His post was accompanied by charts implying rising consumer risks without regulation.
2- Deputy Prime Minister and Foreign Minister Radosław Sikorski echoed the sentiment, framing the veto as an abandonment of consumer protection. "The purpose of this law was to bring order to the wild west of crypto. When the speculative bubble bursts and thousands of Polish families lose their savings, they will know exactly who to thank, he posted, aiming his remarks directly at the president's constituency.
The government's narrative is clear: the veto leaves Polish consumers dangerously exposed to fraud and market manipulation in a volatile sector, prioritizing ideological purity over practical safety.
Crypto Community Fights Back: A Historic Victory for Common Sense
In stark contrast, the veto was met with jubilation and relief by the Polish crypto industry, libertarian politicians, and digital advocates.
1- Tomasz Mentzen, a prominent pro-crypto politician who had publicly campaigned against the bill, hailed the decision: The President has listened to reason and to the people. This veto protects Poles from becoming a digitally surveilled colony and keeps our economy open to the future.
2- Economist and blockchain expert Krzysztof Piech dismantled the government's criticism. "Holding the president responsible for scams is absurd. That is the job of the police and financial regulators under existing laws, he argued. He also delivered the community's trump card: "The panic is manufactured. The EU's comprehensive MiCA (Markets in Crypto-Assets) regulations come into full force across all member states in July 2026. This rushed, flawed Polish law was unnecessary and would have only created a contradictory, hostile local regime for two years before being superseded by EU law.
What Happens Next? A Nation at a Regulatory Crossroads
The political drama is now entering a new phase with significant implications.
- Legislative Limbo: The bill returns to the lower house of parliament, the Sejm. To override a presidential veto, the government must muster a three-fifths supermajority—a significantly higher threshold than the simple majority used to pass it initially. This will be a major test of the ruling coalition's cohesion and strength.
- The MiCA Shadow: The impending EU-wide MiCA regulations loom large over the debate. Opponents of the vetoed bill ask: If MiCA is coming, why the rush with a potentially harmful national law? Proponents counter that Poland cannot afford a two-year regulatory vacuum where consumers are unprotected.
- Global Signal: Poland, as one of Central Europe's largest economies, is sending a signal to the global crypto industry. The president's veto is being interpreted internationally as a potential openness to a more innovation-friendly approach, potentially attracting projects wary of heavier-handed regimes in other EU nations.
BOTTOM LINE
President Nawrocki's veto is more than a policy dispute; it is a high-stakes battle over Poland's identity in the digital age. It pits a vision of a tightly controlled, state-protected market against one of entrepreneurial freedom and minimal interference, all under the shadow of overarching EU rules. The coming weeks will determine whether Poland's crypto landscape becomes a protected fortress or an open frontier—a decision that will resonate far beyond its borders.
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B22389817 · 2026-01-20 · 15 days agoRWA Crypto Trading: The Beginner's Guide to Tokenized Assets
Introduction
The biggest crypto trend of 2025 isn't a meme coin or a flashy Layer-1—it's Real-World Assets (RWA). This narrative is bridging the trillion-dollar world of traditional finance (TradFi) with the speed and efficiency of the blockchain. RWA refers to tokenizing tangible assets like real estate, government bonds (T-Bills), gold, and commodities, turning them into tradable digital tokens.
For the first time, retail traders on platforms like BYDFI can gain exposure to institutional-grade assets with the liquidity and transparency of crypto.
What Are Tokenized Assets?
Imagine owning a small, tradable fraction of a $10 million skyscraper, or a basket of US Treasury Bills, all represented by a secure token in your exchange wallet. This is RWA.
- Fractional Ownership: Tokens enable shared ownership of otherwise illiquid assets.
- 24/7 Liquidity: Unlike stocks, RWA tokens can be traded instantly, 24/7, on the blockchain.
- Transparency: Ownership and valuation can be verified on the public ledger.
The RWA Explosion in 2025
Major financial giants, including BlackRock and Franklin Templeton, are aggressively entering the tokenization space. This institutional interest signals immense growth potential and validity for the sector. As more banks and corporations issue tokenized versions of their funds, the total value locked (TVL) in RWA is projected to soar, turning this into a multi-trillion dollar sector. This surge in institutional activity is precisely why RWA is a hot trading keyword today.
How to Start Trading RWA Exposure
Since RWA tokens often represent stable, value-backed assets, trading them requires a focus on growth via proxy assets and leverage:
- Trade Infrastructure Tokens: Focus on projects that enable RWA, such as the oracle giant Chainlink (LINK) or the Layer-1 networks that facilitate RWA platforms, like Avalanche (AVAX).
- Trade Dedicated RWA Platforms: Tokens like ONDO or Polymesh are directly involved in the creation and management of tokenized securities.
- Use Derivatives: On BYDFI, you can trade the Perpetual Contracts of these key RWA tokens. This allows you to magnify your exposure to the trend without needing to purchase the tokens outright, making it highly capital efficient.
Conclusion
RWA is the convergence point of TradFi and Crypto. It offers traders the best of both worlds: the stability of real assets and the profit potential of blockchain technology. Don't just watch this sector grow; start trading its associated assets today on BYDFI.
2026-01-16 · 19 days agoCrypto Selloff Driven by US Liquidity Shortage, Analyst Says
Crypto Selloff Explained: Why US Liquidity, Not Crypto, Is Behind the Market Crash
Key Points
The recent crypto market crash is driven by a shortage of US dollar liquidity rather than any fundamental weakness in Bitcoin or blockchain technology.
Bitcoin’s price action is closely tracking SaaS stocks, revealing a broader macroeconomic issue affecting long-duration assets.
Gold’s rally has absorbed a large share of available liquidity, leaving risk assets exposed.
Temporary US government shutdowns and Treasury cash management have intensified liquidity pressure.
Despite short-term volatility, leading macro analysts remain strongly bullish on crypto heading into 2026.A Market Crash That Sparked the Wrong Narrative
Over the weekend, the cryptocurrency market experienced a sharp and sudden downturn, wiping out more than $250 billion in total market capitalization. As prices fell rapidly, a familiar narrative resurfaced across social media and trading desks: Bitcoin is broken, crypto is over, and the cycle has ended.
However, according to prominent macro investor Raoul Pal, this interpretation completely misses the real cause of the selloff. The problem, he argues, has nothing to do with crypto itself. Instead, the downturn is the result of a broader liquidity drought in the United States financial system.
This distinction matters, because when markets misdiagnose the cause of a crash, they often misprice the recovery as well.
Bitcoin and SaaS Stocks Are Telling the Same Story
One of the strongest pieces of evidence against a crypto-specific explanation is Bitcoin’s recent correlation with Software as a Service stocks. These two asset classes appear unrelated on the surface, yet they have been moving almost in perfect sync.
The reason lies in how both assets are valued. Bitcoin and SaaS stocks are considered long-duration assets, meaning their worth is largely based on future adoption, growth, and cash flows rather than immediate returns. Assets with these characteristics are extremely sensitive to liquidity conditions and interest rates.
When liquidity tightens, investors pull capital from riskier, long-duration assets first. This explains why Bitcoin and SaaS stocks have declined together, while safer assets have held up better.
In other words, the market is not saying that crypto has failed. It is saying that liquidity is scarce.
Gold’s Rally and the Liquidity Drain Effect
Another overlooked factor in the recent selloff is gold. As gold prices surged, they absorbed a significant portion of marginal liquidity that would normally flow into assets like Bitcoin or growth stocks.
When liquidity is abundant, multiple asset classes can rise together. But when liquidity becomes constrained, capital flows toward perceived safety. In this environment, gold benefited, while risk assets paid the price.
This dynamic reinforces the idea that the selloff was not triggered by bad crypto news, regulatory shocks, or technological failures. It was driven by competition for limited liquidity.
How US Government Actions Intensified the Pressure
The liquidity squeeze did not happen in isolation. Temporary US government shutdowns and structural issues within the financial system added fuel to the fire.
In previous cycles, liquidity drains caused by the US Treasury rebuilding its cash balance were partially offset by funds flowing out of the Federal Reserve’s Reverse Repo Facility. That mechanism acted as a buffer, reducing the overall impact on markets.
Today, that buffer no longer exists. The Reverse Repo Facility has effectively been drained, meaning any Treasury cash rebuilding now results in a direct and unfiltered liquidity withdrawal from the system.
As liquidity leaves, risk assets react immediately.
FAQ
Is this crypto selloff caused by problems within the crypto industry?
No. The evidence suggests that the selloff is driven by macroeconomic liquidity conditions rather than any failure in blockchain technology or crypto adoption.
Why is Bitcoin moving like tech stocks?
Bitcoin and SaaS stocks are both long-duration assets, meaning they depend heavily on future growth expectations and are highly sensitive to interest rates and liquidity changes.
What role did gold play in the downturn?
Gold absorbed a large share of available liquidity during its rally, reducing the capital available for risk assets such as crypto and growth stocks.
Are interest rates the main risk for crypto right now?
Liquidity matters more than rates alone. While rate expectations influence sentiment, actual liquidity flows have a stronger impact on asset prices.
Is the long-term outlook for crypto still positive?
Many macro analysts remain strongly bullish on crypto for the coming years, especially if liquidity conditions improve as expected.
Debunking the Fear Around the Federal Reserve Narrative
Some analysts have attributed the crypto downturn to concerns over a potentially hawkish Federal Reserve leadership, particularly fears that future rate cuts may be slower than expected.
Raoul Pal strongly rejects this explanation. He argues that the market is misunderstanding the likely policy direction. According to his view, the Federal Reserve’s approach will resemble the Greenspan-era playbook, focusing on rate cuts while allowing economic growth to run hot.
Under this framework, productivity gains driven by artificial intelligence are expected to help manage inflation, giving policymakers room to ease financial conditions without triggering instability.
If this outlook proves accurate, the current liquidity squeeze may represent a temporary phase rather than a structural shift.
Why 2026 Could Be a Breakout Year for Crypto
Despite the pain felt across crypto markets, Pal remains firmly bullish on the medium-term outlook. He believes that most of the liquidity drain is nearing its end, and that the market is gradually gaining clarity on how fiscal and monetary forces will interact over the next cycle.
When liquidity returns, long-duration assets tend to rebound aggressively. Historically, Bitcoin has been one of the biggest beneficiaries of such shifts.
Rather than signaling the end of crypto, this selloff may ultimately be remembered as the final shakeout before the next expansion phase.
Final Thoughts: Macro Forces Matter More Than Headlines
The recent crypto crash was dramatic, but drama does not equal diagnosis. When Bitcoin moves in lockstep with SaaS stocks and reacts to Treasury liquidity flows, the message is clear.
This was not a failure of crypto.
It was a reminder that macro liquidity still rules global markets.For long-term investors, understanding that difference can be the edge that separates panic from opportunity.
Whether you’re a beginner or a seasoned investor, BYDFi gives you the tools to trade with confidence — low fees, fast execution, copy trading for newcomers, and access to hundreds of digital assets in a secure, user-friendly environment.
2026-02-04 · 4 minutes ago
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