Crypto burns are common operations in the cryptocurrency ecosystem and are carried out to permanently remove a certain amount of cryptocurrency from circulation and reduce its total supply. This operation is carried out with a deflationary approach. The current token value is expected to increase in the long term as the number of tokens in circulation decreases.
How Is It Performed?
The burning process renders cryptocurrencies inaccessible and unusable. Burns are carried out by sending cryptocurrencies to invalid (without Private Keys) burning addresses. This action cannot be undone. Cryptocurrencies sent to burning addresses cannot be recirculated in any way.
Why Are Fan Tokens Burned?
The goal is to maximize project value by reducing the number of tokens in circulation in accordance with the club’s success. Theoretically, the current value of the Fan Token will increase since there will be fewer Fan Tokens in circulation as a result of the burning process. The market cap of a Fan Token is calculated by multiplying the number of Fan Tokens in circulation by the price of a Fan Token. Assuming that the current market cap of the Fan Token will not change, here is the “theoretical” overview before and after a burn:
An example:
X Tokens in circulation: 50,000,000
Market price of X Token: $5
Market cap of X Token: $250,000,000
Let’s suppose that 10,000,000 X Tokens are burned.
Number of X Tokens in circulation after the burn: 40,000,000
If the market cap of X Token remains the same, the expected “theoretical” price will be $6,25. That is, the price of each Fan Token whose market value does not change after this process may increase in proportion to the amount burned.
Market price of X Token: $6,25
Market cap of X Token: $250,000,000
Warning: The example above is a demonstration of the market cap calculation, which is often used in financial markets. The data in the example does not belong to any Fan Token project. The example, where the theoretical price is calculated, does not have to be valid for Fan Tokens, which are shaped entirely according to the supply and demand of investors.
What Are the Fan Token Burn Amounts?
The burning processes of the Fan Token projects listed on Bitexen vary according to the end-of-season rankings of the clubs, the number of goals scored in the matches, whether they are league champions or not, and their success in cups and tournaments. You can view burn amounts in the whitepapers of the Fan Token projects.
