Token Burn
A token burn permanently removes tokens from circulation by sending them to an address no one can spend from. Some protocols burn part of their fees, which offsets new issuance.
A token burn permanently removes coins from circulation. Some networks burn part of every transaction fee, while some projects run scheduled burns. Burns reduce supply, but whether that helps the price depends on demand and on how many new tokens are created at the same time.
- Category
- Cryptocurrency and Blockchain
- Reading time
- 4 min
- Also called
- Coin burn, Burning tokens, Burn mechanism
- Updated
Token burn in plain words
Burning means destroying tokens so they leave circulation for good.1
Since the London upgrade, the base fee per gas is burned.2
A burn is one side of a token's supply policy; new issuance is the other.
How a fee burn works
A user pays a fee
Every transaction pays a fee to be included in a block.
Part is destroyed
On Ethereum, part of each fee goes to validators and part is burned.3
Supply drops
The burned coins can never be spent again.
New coins are issued
Validators or miners still receive newly created coins.
Net change
Compare the two forces on supply: new issuance and burning.1
Policy view
Treat emissions, burns and governance changes together as the token's “monetary policy”.4
Worked examples
Example 1 — Net supply change
Supply falls 9,000 coins a monthA hypothetical network issues 2,700 coins a day and burns 3,000 coins a day.
| Net change | 2,700 − 3,000 = −300 coins a day |
| Over 30 days | −300 × 30 = −9,000 coins |
More was burned than issued, so supply shrank — the balance of the two sets the token's inflation or deflation.1
Example 2 — Fee share burned
100 coins burnedA hypothetical chain collects 1,000 coins in fees in a day and burns a fixed 10% share.
| Burned | 1,000 × 10% = 100 coins |
| Paid to validators | 1,000 − 100 = 900 coins |
Another chain uses a similar idea, burning a fixed share of the gas fees in every block, with validators setting the share.5
Example 3 — Burn smaller than issuance
Supply still grows 4%A hypothetical token burns 1 million tokens a year but issues 5 million new ones on a 100 million supply.
| Net new tokens | 5 − 1 = 4 million |
| Net inflation | 4 ÷ 100 = 4% a year |
Projecting issuance and burn rates forward shows how much inflationary or deflationary pressure lies ahead.4
Fee burn vs scheduled burn
| Aspect | Fee burn | Scheduled burn |
|---|---|---|
| Trigger | Every transaction | A set date or formula |
| Size depends on | Network activity | Rules set by the project |
| Predictability | Varies day to day | Usually announced |
| Example | Ethereum base fee | Periodic BNB burns |
How traders use burn data
Supply outlook
Net burn changes Inflation of a token.
Valuation
Supply changes feed Market Capitalisation and Fundamental Analysis.
Activity signal
Rising fee burns often track busy networks and higher Volume.
Narrative checks
Burn announcements can drive short-term Momentum.
Advantages and disadvantages
Advantages
- Reduces circulating supply permanently.
- Fee burns are transparent on-chain.
- Can offset new issuance.
- Links token supply to network use.
Disadvantages
- Does not guarantee a higher price.
- Small burns may be mostly marketing.
- Burns can fall when activity drops.
- Issuance can outweigh the burn.
Going deeper
Read as far as you need. Each level builds on the one before it.
Burn is only half the story
Beginner
Supply depends on two forces: issuance adds tokens and burning removes them.1 Always compare the two before calling a token deflationary.
EIP-1559 fee burning
Intermediate
Under EIP-1559 the base fee per gas is burned, so busy periods destroy more ETH, while tips still go to validators.2
Formula-based burns
Advanced
Some burns follow a set formula — for BNB, based on the quarter's median price and a normalised block count.5 Read the formula before assuming a burn's size.
Common mistakes
Assuming burns always lift price
Price also depends on demand.
Ignoring issuance
Gross burns can hide net inflation.
Trusting headline numbers
Check burns on-chain, not just in announcements.
Confusing locked with burned
Locked tokens can return; burned ones cannot.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A burn destroys tokens permanently.
- Ethereum burns the base fee on every transaction.
- Net supply equals issuance minus burn.
- Burns do not guarantee price gains.
- Check burn data on-chain.
Frequently asked questions
Does a token burn increase price?
Is ETH deflationary?
How is a burn verified?
Further learning
- Inflation
How supply growth affects value.
- Market Capitalisation
Supply times price.
- Fundamental Analysis
Using tokenomics in analysis.
- Trading Fees and Commissions
Where fee burns come from.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- ethereum.org. ETH issuance (opens in a new tab) Checked .
- Ethereum Improvement Proposals. EIP-1559: Fee market change for ETH 1.0 chain (opens in a new tab) Checked .
- ethereum.org. What is ether (ETH)? (opens in a new tab) Checked .
- Binance Research. Tokenomics Deep Dive (opens in a new tab) Checked .
- BNB Chain (BNBBurn). BNB Burn (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.