Fee burning is a mechanism where a portion or all of the transaction fees on a blockchain network are permanently removed from circulation. This process reduces the total supply of the native cryptocurrency, potentially increasing its scarcity and value over time. It functions as a deflationary measure, counteracting inflation caused by new coin issuance or providing a value accrual mechanism for the token. The burned fees are typically sent to an unspendable address, making them inaccessible forever.
Context
Fee burning gained significant attention with Ethereum’s EIP-1559 upgrade, which introduced a base fee that is burned, creating a deflationary pressure on ETH supply. Discussions often center on the economic impact of burning mechanisms on tokenomics, network security, and miner or validator incentives. Future protocols may adopt more dynamic burning strategies to optimize network economics and sustainability.
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