Cardano (ADA) Is Latest Crypto Asset to Consider Burning Mechanism

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Car­dano might soon have a token-burn­ing mech­a­nism. That’s what infor­ma­tion con­tained in its recent sta­tus updates seems to suggest. 

The sta­tus update, which is part of a new ini­tia­tive by the com­pa­ny to release updates about Cardano’s devel­op­ment every week, shows that two of its teams are work­ing on a token burn­ing mechanism. 

The report reads that the Adres­tia team con­tin­ued work­ing on final­iz­ing a new trans­ac­tion work­flow to add token mint­ing and burn­ing capa­bil­i­ties. It fur­ther added that the Hydra team is con­sid­er­ing options for token mint­ing and burn­ing with­in a Hydra Head along with sce­nar­ios of using tokens instead of datums.

With dif­fer­ent teams work­ing on inte­grat­ing token burn­ing, the foun­da­tion appears to be pur­su­ing this aggres­sive­ly. Adres­tia was launched in 2020 to make it faster for oth­er chains to inte­grate and inter­act with Car­dano. The team worked on build­ing the web APIs and libraries that make it easy for devel­op­ers to access and deploy on Cardano.

On the oth­er hand, Hydra Heads was recent­ly launched on Car­dano test­net even though the the­o­ret­i­cal paper has been pub­lished since last year. It describes a col­lec­tion of Lay­er 2 solu­tions to improve net­work scal­a­bil­i­ty and secu­ri­ty.

Token burn is one of the mech­a­nisms used by the cryp­to com­mu­ni­ty to make an asset defla­tion­ary as it per­ma­nent­ly removes a cer­tain amount of tokens from cir­cu­la­tion. It’s sim­i­lar to stock buy­backs and most times helps to increase the price of the token because it ensures scarcity.

Per San­ti­ment data, Car­dano is one of the five fastest devel­op­ing net­works in the last 30 days. But the per­for­mance and improve­ments are yet to reflect on the price, as it is still trad­ing for less than $1 as of press time.

Crypto Assets With Burning Mechanisms

Sev­er­al cryp­to projects have imple­ment­ed a burn­ing mech­a­nism to ensure the scarci­ty of their tokens. These projects include BNB, Avalanche, Ethereum, Rip­ple Pro­to­col, Shi­ba Inu, and more. 

Ethereum helped to pop­u­lar­ize this method when it imple­ment­ed the EIP-1559 upgrade almost a year ago. Since then, the net­work has burnt almost 2 mil­lion ETH which is worth rough­ly over $5 billion.

BNB also has its own coin-burn­ing mech­a­nism that seeks to reduce the total sup­ply of the asset by 50%. It has two burn­ing mech­a­nisms; the quar­ter­ly burn and the auto-burn. 

The quar­ter­ly burn has been in effect for a while now, and the net­work had its 18th burn as recent­ly as this Jan­u­ary.  On the oth­er hand, the auto-burn mech­a­nism auto­mat­i­cal­ly deter­mines the amount of BNB to be burned using the price and num­ber of blocks gen­er­at­ed dur­ing the quarter.

Oth­er dig­i­tal assets like AVAX, XRP, Shi­ba, and Luna also have token-burn mech­a­nisms. In fact, this method is grad­u­al­ly becom­ing a norm for cryp­to projects.

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Disclaimer

All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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