How a token burn works?

[PercT4b]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?


I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work), feel free to go deep with details, I'll try my best to understand the process.

[BlackHatCoiner]

but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address

What kind of projects follow this type of mechanism? It sounds horrible.

Proof of burn tokens are usually dependent of other blockchains and in order to be rewarded with new tokens you'll have to burn coins from the X blockchain. For example, I could send a specific amount of bitcoins to a burn address (or make an OP_RETURN transaction) and be rewarded with tokens analogously with the amount of coins I burnt.

[n0nce]

How burning coins works:
You send them to an address that is invalid, i.e. there is no valid private key that the address can be derived from.
Such keys are for example the key ‘0’.

Here is how valid private keys are defined:

A bitcoin private key is a number greater than or equal to 1 and less than X, where:
X = 0xFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFEBAAEDCE6AF48A03BBFD25E8CD0364141

It is possible to look it up via block explorers. Many coins were sent to it and they are all unspendable!

As mentioned, you can also use the OP_RETURN opcode which marks the output as invalid so it can’t be spent either.

I just found an article that explains it quite well even with code for creating a burn address:
https://btcleak.com/2020/07/27/how-to-create-a-bitcoin-black-hole/

If anyone can access and burn your coins, you’re either not holding your keys or it’s such a massively scammy shitcoin that you should sell it immediately!

[TastyChillySauce00]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?

The healthy burn must be the platform generate revenue from running its service and then some percentage of these revenues will be used to did buy back and burn like what binance did. Unhealthy burn should be scammer has access to the tokens and then sent lots of tokens to the burning address. None has access to the default address.

I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work),

It must there was a backdoor that already created by scammer. I have heard a coin called gold coin that used such mechanism. A small amounts from any transactions of gold token will be taken and burned automatically even if that's already delivered in your wallet.

[BlackHatCoiner]

You send them to an address that is invalid, i.e. there is no valid private key that the address can be derived from.

This is a false assumption. All the 2¹⁶⁰ addresses are valid except the opposite is proved. For instance, we know that on average, there are 2⁹⁶ private keys for each address. (Since the key range is nearly 2²⁵⁶ and the addresses are 2¹⁶⁰.)

Only if you searched among all the keys and found out that one address can't be created from ANY of the nearly 2²⁵⁶ keys, it can be considered invalid. (And that characterization just for spending from it)

Such keys are for example the key ‘0’.

By key you mean private key? A private key can't have the value 0, because that'd be outside the secp256k1's range. You probably mean - 1111111111111111111114oLvT2 - whose RIPEMD-160 hash is zero.

[PercT4b]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?

The healthy burn must be the platform generate revenue from running its service and then some percentage of these revenues will be used to did buy back and burn like what binance did. Unhealthy burn should be scammer has access to the tokens and then sent lots of tokens to the burning address. None has access to the default address.

I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work),

It must there was a backdoor that already created by scammer. I have heard a coin called gold coin that used such mechanism. A small amounts from any transactions of gold token will be taken and burned automatically even if that's already delivered in your wallet.

Ok the backdoor theory could be a valid option, maybe some instructions created by the scammer that allow him to "take back" the tokens directly from my wallet and burn them.

How could I inspect the code behind a token?...do you know a program or a website that could allow me to take a look at the instructions?

[Jackl87]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?


I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work), feel free to go deep with details, I'll try my best to understand the process.

They can not access the tokens that are in your wallet. They can only access the tokens that are in the wallet of themself so a wallet that belongs to the team of the project or the official project wallet. Then they just sent tokens from the official wallet to one of the none burn adresses where nobody has the keys of and therefore those tokens can never be accessed again and therefore lost forever even though they can be watched in the explorer. There are some rebasing tokens that are adjusting the token supply everyday or every or so to keep the price on a defined level and and this affects also the tokens that are in private wallets, but that is not the same as burning tokens.

[n0nce]

Such keys are for example the key ‘0’.

By key you mean private key? A private key can't have the value 0, because that'd be outside the secp256k1's range. You probably mean - 1111111111111111111114oLvT2 - whose RIPEMD-160 hash is zero.

Yes, I mean using private key 0 exactly because it’s invalid (not on secp256k1). An address can still be derived from it and funds sent to it. But they cannot be redeemed. A very easy way to burn coins without constructing a custom script, can be done with any wallet.

[BlackHatCoiner]

An address can still be derived from it and funds sent to it.

An address cannot be derived in such case, because the private key is outside the range of numbers that are allowed for multiplying G and getting a public key. In other words, there's no public key if the private key is 0 and thus, nothing to be hashed and then encoded. It must be between 1 and 115,792,089,237,316,195,423,570,985,008,687,907,852,837,564,279,074,904,382,605,163,141,518,161,494,336.

[Sterbens]

Simply put, burning tokens is to permanently reduce the circulation of tokens on the market. Like the BNB coin burning example as I read from the Binance academy article they say burning is based on the amount made on the exchange in a given time.

The firing process is usually based on a few basic factors: Cryptocurrency holders, and smart contracts

[so98nn]

Simply put, burning tokens is to permanently reduce the circulation of tokens on the market. Like the BNB coin burning example as I read from the Binance academy article they say burning is based on the amount made on the exchange in a given time.

The firing process is usually based on a few basic factors: Cryptocurrency holders, and smart contracts

This is good one so far. I mean what op is onto is described here. The burn is simply process to overcome the circulation limit. I mean many projects also do this process increase the demand by reducing the supply of that particular coin. Burning simply means the burnt coins won’t be available for circulation or use and this available coins will be limited in number. This strategy is either followed at the initial stages of the project launch or either in the middle when the project is very popular with good amount of investors. The decision is surely made based on these principles so that the project can gain more and more demand and investors there after. 

[Valak]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?


I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work), feel free to go deep with details, I'll try my best to understand the process.

The burning of the tokens in your wallet address is carried out during the transaction, it is taken based on the transaction fees that you make. For example burning on BNB coins. Every transaction you make must cost 0.001 BNB, but the fee no longer goes to the platform's wallet address, but goes to the token burning wallet address. However, the habitual burning is not large, because the high number of transactions reduces the number of coins. But there is also a setting when the token is generated, maybe you can learn about it in cointool.

[dbc23]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?

This basically the job of miners and developers which burn their tokens to cause a rise in price due to its scarcity. Most times this is used for project that has gotten lots of investors the burn this tokens thereby making it's very scares and the percentage burnt is sent to an address where no one can access and once the supply chain is limited it brings about an inflation in price

[vv181]

~snip~
How could I inspect the code behind a token?...do you know a program or a website that could allow me to take a look at the instructions?

EtherScan or BscScan would do the job, you can inspect the token smart contract there. And also refer to the Binance article link that referred by @Sterbens, it is a comprehensive article that explains the burn mechanism quite well. If you comprehend it, you will be able to see and how to verify the burn smart contract mechanism should works.

[bct-user]

I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address

Have you learned deeply about burning tokens done by crypto projects?
Note this: they don't burn tokens of investors but they burn tokens that they have allocated for the burning programs from the early phase. So, you don't need to be worried about investors' tokens in the future. The developers or project teams, only burn the reserved tokens for burning.

[tabas]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?


I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work), feel free to go deep with details, I'll try my best to understand the process.

That's simply burning, they're sending it to an address that no one can ever recover so if an ERC20 token, they'll simply send it to those addresses that are known to be burning addresses. That's how they reduce the supply of their tokens if they have a fixed amount of supply.

[speedforce]

I never heard someone can access our wallet and burn it. But theres some mechanism like converting Banana to GNANA, its stated on the transaction that when u convert it will burn 28% of your Banana.
The idea of its burning mechanism is to increase the price of both Banana and Gnana.

[CaVO32]

I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address

Have you learned deeply about burning tokens done by crypto projects?
Note this: they don't burn tokens of investors but they burn tokens that they have allocated for the burning programs from the early phase. So, you don't need to be worried about investors' tokens in the future. The developers or project teams, only burn the reserved tokens for burning.

Yes, it is not that they can burn what you are holding. Never heard such situation also, accessing your wallet to burn some of your tokens. What most developers do is send what they have allotted tokens for burning to a so-called black hole address where no one can touch or send back those tokens again. You can have a good grasp by reading the below article -

https://btcmanager.com/ethereum-genesis-address-black-hole-520-million-worth-tokens/

[n0nce]

An address can still be derived from it and funds sent to it.

An address cannot be derived in such case, because the private key is outside the range of numbers that are allowed for multiplying G and getting a public key. In other words, there's no public key if the private key is 0 and thus, nothing to be hashed and then encoded. It must be between 1 and 115,792,089,237,316,195,423,570,985,008,687,907,852,837,564,279,074,904,382,605,163,141,518,161,494,336.

You're right, I misremembered! I was thinking of the case where someone sent to public key 00 due to a software bug it seems:

There really isn't anything to see here, there is no need for a raw hex either. The OP is clear enough. 0x00 is being used as the public key for all the inputs and when the interpreter reaches the first OP_CHECKSIG and pops the top stack item (ie. 0x00) it will reject the transaction because it has an invalid public key and it fails here as CPubKey.IsValid() returns false for anything smaller than 1.

I'm always surprised by people who try to fool others into thinking these things are "their own private key"!
Not to mention that they try to spend outputs that sat there unspent for 7 years as if nobody else (with more understanding of how bitcoin works) has ever seen these things

[yazher]

I never heard someone can access our wallet and burn it. But theres some mechanism like converting Banana to GNANA, its stated on the transaction that when u convert it will burn 28% of your Banana.
The idea of its burning mechanism is to increase the price of both Banana and Gnana.

They can't burn the tokens when it's already out of their main wallet or the tokens are already in the investor's wallet. The only token they can burn is in the total allocation in their personal wallet which they have the access to send to the address like for example in Ethereum Network: Burn Address

As for the idea of converting it and paying some tax when you convert their tokens to fiat or any other cryptocurrencies, that's one thing they can minimize the total supply and it works slowly but surely.

Some other burning mechanism when you used their platform and you will need to pay little fees for that. Just like in the NFT games they have multiple ways of burning their tokens.

[FinneysTrueVision]

Almost every project that has their own token does burnings whether they are scammy or legit projects. They don't burn what is in user's wallets. If it is an exchange they will burn the fees they have collected. Since they are making a profit from all the other coins they have listed, burning their own native token is not a huge loss.

[bitcon]

Many projects utilize this process for many reasons, including to forcibly make the price rise (this method is particularly used by scammy projects) via reducing the supply of the token.


The question I have is: how do they do that?


I know the classic way which is all about to send the tokens to a "black hole address" which de facto makes them unusable, but I would like to know how technically this process work, how do they can access the tokens present in your wallet and send them to the burn address (this is basically how some scams work), feel free to go deep with details, I'll try my best to understand the process.

Don't worry, they don't exactly touch your coins. More often the team has its own coins, so they can burn part of them or they buy coins in the market which also helps raise the price. What comes to specifically burning, they just send that coin to the so-called burning address 0x0000...

Nobody has access to this wallet address so they just get out of circulating supply.