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Author Topic: Burning vs. Retaining in Token Offerings (ICO's)  (Read 351 times)
ico41 (OP)
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October 07, 2017, 07:14:44 AM
 #1

To what extent do you all think it's important that a token offering has a policy to burn unsold tokens in an offering? 

It seems like most ICO's make it a policy to burn unsold tokens, and yet there are also a number of them which choose to "retain for future development" or some such thing.  My understanding is that if an offering burns unsold tokens, then the total amount of tokens is reduced, which in a supply and demand market, would encourage a higher value.  Seems simple enough. I suppose I'm over-simplifying, though. I'm still trying to get my head around the ICO space, which seems to be evolving (or devolving, depending on your point of view) at a dizzying pace.

Does anyone know of a comparison chart between those ICO's which feature a token that can be mined vs. ICO's which feature tokens that are "pre-mined" and the performance of the token and success of the project?  Can we draw any kind of conclusion based on this, or are there extenuating circumstances for each ICO that demand a one-off analysis for each without relying on generalizations or rules of thumb, as it were?

Sorry for all the questions, but I'm honestly trying to learn with some depth the mechanics of these ICO's and the more I read, the more opinions I find and less clarity - so I figured I'd just ask.  Thanks ...

munair
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November 09, 2017, 07:58:02 AM
 #2

I think it depends on the type of token. For example, if the token is a *rewards* token that gives token holders some financial benefit for the performance of the project, then burning the unsold tokens means that those that hold the sold tokens will get a larger share of the reward.
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November 09, 2017, 03:16:21 PM
 #3

Whether a coin is burned or mined or whatever depends on how the coin will work out for the project. Some projects for example are automatically creating coins so that supply is adjusted, but the thing is it depends on what the project is trying to implement. Different methodologies work out different depending on how you implement them. For example, Bitcoin, wouldn't make sense if tokens would be burned because it acts as a store of value with pre-defined numbers of BTC in circulation. From the other hand, other projects might prefer minting because they are not focused on the exchange of value, but offer something else. Don't try to invest based on whether the coin is Minted or Burned or whatever, just look at the idea and the big picture and decide best on that whether you want to put your money on stake or not.
uszaty43
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November 10, 2017, 12:56:04 AM
 #4

It is better to burn the tokens that haven't been sold.
Just think about this scenario, if they were expecting to raise 1 million dollars with 1 million coins, then it means that the price of each token will be $1.
if they raise just 100k dollars, then it means that each token will be worth $0,10, but if they promised that all the tokens would be worth $1, then they can not break that promise, and this is why they decide to burn the tokens, and there are going to be 100k of tokens in circulation, with 100k of marketcap ($1 each)
Fundamentals Of
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November 10, 2017, 01:41:01 AM
 #5

I always prefer burning of unsold tokens. That means the coins held by the project team is lesser and that there is no risk that they would suddenly dump them and cause the value of the token to go spiraling down. However, depending on the project, there are designs that need the existence of the tokens. Dent is one case. There are also other ways. For example, token locking. It locks the remaining tokens for a few years before finally releasing them. 
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November 10, 2017, 03:56:23 AM
 #6

Burning decreases the supply which increases the overall market value of an asset

Some projects have an ongoing supply burn built-in as opposed to other methods such as post-ICO burns or supply reduction

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