What is Token Burning? How will it benefit the BLX Token price over time?

INTRODUCTION

Maintaining the value of an asset can be a difficult obstacle to overcome. When it comes to cryptocurrency, many people worry about the high number of coins in circulation and the ability to produce coins at a fast rate. This has led several cryptocurrencies to find innovative ways to incentivize investors and help maintain the value of their coins.

Burning cryptocurrency is a popular method of boosting the value of a coin or token. Token burning removes coins from circulation, permanently decreasing the overall supply of the cryptocurrency. This helps to increase scarcity and raise the value of each remaining coin, which is crucial for coins that can be mined quickly.

WHAT IS TOKEN BURNING?

Token burning means removing coins from the overall supply of a cryptocurrency. This typically involves sending the coins or tokens to a wallet with no known private keys. This wallet can only receive assets, thus effectively making them inaccessible.

While burning a small portion of coins can help maintain the value of a cryptocurrency, the token burning process is often a community effort. Occasionally, substantial cryptocurrency holders or people with a large social media following will encourage a community burn. When everyone burns a small number of their holdings at the same time, it can make a notable difference in the overall number of coins in circulation — and, therefore, in the coin’s value.

In other cases, token burning happens steadily over time. Many users don’t even notice it. For example, Ethereum burns a small percentage of Ether during each transaction. This adds up over time, which can cause the coin to steadily increase in value as supply decreases.

HOW DOES TOKEN BURNING WORK?

There are a few different ways to burn tokens, the most common being sending the tokens to a wallet to be destroyed. Technically, all a user needs to do to burn coins is to send them to a wallet with an invalid address. However, most cryptocurrencies have specific instructions and processes in place for burning tokens.

Keep in mind that any coins burned will be permanently removed from your account, and there’s no way to return them. Before you execute a burn function or send tokens to a null address, double-check to make sure that all of the amounts and information you’ve specified is correct.

HOW DOES TOKEN BURNING WORK ON OPTIONBLITZ?

Burning follows an almost identical pattern to Staking (and uses the same formula) with the only difference being that:

The pay-out increase from burning is dependent on four factors:

• The number of tokens staked (S)
• The Burning multiplier M has a fixed value of 8 (unobtainable via Staking)
• based on stake duration The amount of liquidity provided on the platform (L)
• The current BLX price (P)

Since burning is perpetual, there is no expiration date, e.g., the price at which the tokens were burned is snapshotted forever.

Continuing the examples from the BLX Utility article, we can then show how much BLX needs to be burned in order to obtain certain discount, using the same assumptions as above:

• 10 000 USDC liquidity provided
• 0.5 current BLX price

BUYBACK & LP

Buyback and burn have been a very successful and popular mechanic in the crypto space, which has historically helped token price appreciation and keeping the tokens scarce.

Burning tokens based on collected fees has some very desirable effects. The approach’s beauty is the inverse correlation between the project’s success and the number of tokens burned, essentially creating a self-regulating mechanism for the total number of tokens in circulation.

If the project performs well, the token price would appreciate naturally, which means that a fixed amount of FIAT revenue (1MM for example) would buy fewer tokens (as their price would be higher). If we assume a token price of 10 USDC (purely as an example), this will net 100k tokens, 40% of which would be burned.

If the project performs worse, the token price would be lower, and a fixed amount of FIAT revenue (100k, for example) would buy more tokens. If we assume a token price of 0.1 USDC, this will net 1MM tokens, 40% of which would be burned.

With the emergence of Decentralised Finance (DeFi) and Automated Market Makers (AMM) such as Uniswap, however, a new approach has emerged which has the core benefits of the buyback and burn approach, together with the added value of deeper liquidity — buyback and liquidity provision. In this scenario, instead of burning tokens, they are first provided as liquidity for the token on its main AMM market and then the resulting LP tokens are burned, thus combining the benefits of the reduced token supply together with deeper liquidity for the token.

In the case of Optionblitz, 5% of any tokens which are un-staked will be collected as fees and dedicated towards buyback & LP. Since the fees are already collected in LP tokens, those tokens would just directly be burned.

BLX vs BNB BURNING COMPARISON

The closest sibling to the BLX is the Binance coin (BNB) as both tokens are used as a fee discount token with an aggressive buyback and burn programme. It is essential to point out some crucial differences in this regard.

• Binance has burned approximately 20 mil BNB or about 11.1% of its total supply over nearly three years. Optionblitz intends to burn a considerably more aggressive amount.
• The fee reduction benefits on Binance reduce over time, while the OptionBlitz will always have a maximum of 50%.
• Binance has a cap on the number of tokens burned at 50%, while BLX has no cap
• Binance does direct token burns, while OptionBlitz incentivises Liquidity token burns having the added benefit of both strengthening the liquidity and taking the tokens out of circulation.
• The burning on Binance is centralised, while the one on OptionBlitz is mainly community driven.

Now you know how token burning and buyback & LP works on THE OpionBlitz platform, CLICK HERE to learn about Staking Rewards