A token burn permanently removes tokens from supply by sending them to an unspendable address. As a flow sink, a burn ties deflationary pressure directly to usage, with a share of fees burned per transaction. A burn only changes the structural economics if it is funded by real, sustained activity.
A one-off promotional burn moves the denominator once and then stops. Only a usage-funded recurring burn builds a real deflationary loop.
How it is calculated
The math is simple: tokens burned per period equals fee volume times the burn fraction of the fee, divided by token price. Burn impact moves with three variables at once. Double the fee volume, double the burn fraction, or halve the price, and all three produce the same rise in burn rate. Burns do not operate in isolation from the rest of the economics.
Example
EIP-1559 on Ethereum is the cleanest real-world case. The base fee, set by an auction clearing mechanism, is burned entirely rather than paid to validators. In high-activity periods, Ethereum has been net-deflationary, burning more ETH per period than it issued as validator rewards.
The point is that the burn is unavoidable. Every transaction triggers it, creating a genuine flow sink at the infrastructure level. A burn paired with a buyback is also common: revenue buys the token on the open market and sends it to the burn address, but it only holds up if the funding revenue is sustainable.
Common mistake
The promotional burn is the trap. A team burns a fixed slice of treasury tokens and announces it as a milestone. It shifts supply once, creates no demand sink, ties nothing to usage, and builds no sustainable loop. It is a headline, not a mechanism.
See Tokenomics Audit for how this applies in practice.
Related terms
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