Sequencer Fee Burn

Definition ∞ Sequencer fee burn is a mechanism in some blockchain systems where fees collected by transaction sequencers are permanently removed from circulation. Sequencers are entities responsible for ordering and submitting transactions to a base layer blockchain, particularly in Layer 2 scaling solutions. By burning a portion of the fees they collect, the total supply of the associated token is reduced, potentially increasing its scarcity and value. This mechanism aims to align incentives and contribute to the economic sustainability of the network.
Context ∞ Sequencer fee burn is a key component of the economic design for many Layer 2 scaling solutions, addressing concerns about token utility and long-term value. Discussions often center on the optimal percentage of fees to burn, the impact on sequencer profitability, and its overall effect on token price dynamics. Future developments will likely involve refining these burning mechanisms to ensure network health and equitable distribution of value within complex blockchain architectures.