Definition ∞ Transaction fee burning is a mechanism where a portion or the entirety of the fees paid for processing transactions on a blockchain is permanently removed from circulation. Instead of being entirely allocated to miners or validators, these tokens are sent to an unspendable address, effectively reducing the total supply. This process introduces a deflationary pressure on the token’s supply.
Context ∞ The implementation of transaction fee burning, notably by Ethereum with EIP-1559, aims to make a cryptocurrency more scarce and potentially increase its value. This mechanism also provides a more predictable fee market for users. Debates continue regarding the optimal percentage of fees to burn and its long-term impact on network security and token distribution.
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