Burning

Burning is the act of permanently removing tokens from circulation. It usually happens when tokens are sent to a burn address or inaccessible wallet where they cannot be recovered, transferred, or spent. The process of burning can be done manually by a project team, automatically via a smart contract, or as part of a protocol’s fee and supply design. Some of the top reasons for burning tokens include reducing circulating supply, managing token economics, or showing that certain tokens are no longer active. Burning does not automatically make a token more valuable, because price still depends on demand, liquidity, market conditions, user confidence, and other factors.

For example, Ethereum burns part of certain transaction fees through EIP-1559, which permanently removes that ETH from circulation.