Beldex is a blockchain project aimed at privacy that promises to create a safe and anonymous platform for digital transactions. In blockchain, burning mechanisms often relate to the purposeful burning of a particular number of cryptocurrencies in order to lower the overall supply. This can have a variety of effects on the economy and the worth of the remaining tokens. Notably, in blockchains like Ethereum, burning mechanisms render the inflationary token economic model to deflationary. Let’s dive deep into the burning mechanisms in Beldex.
Why does Beldex need a burning mechanism?
Scarcity
The implementation of a coin burn mechanism reflects Beldex’s dedication to a robust token economy and long-term viability; to achieve a balance between supply and demand by regularly limiting the amount of BDX tokens, which might help to the coin’s stability and growth.
When the entire quantity of a cryptocurrency is reduced, the remaining coins become more rare. Scarcity can contribute to an increase in perceived value in economic terms. This may be used to control inflation while also maintaining or increasing the value of current tokens.
Economic Planning and Tokenomics
A cryptocurrency’s economic architecture may include the burning of coins/tokens. It is a method of constructing a deflationary model in which supply drops over time, perhaps leading to higher demand.
Community Offers
Burning can be used to reward or motivate members of the community. A project, for example, could burn a fixed amount of transaction fees, thereby transferring value to existing coin holders.
Token Swaps
In certain circumstances, projects exchange existing coins for new ones through token swaps or migrations. Burning the old coins prevents them from being double-spent during the transfer. This can be seen in the swap of BDX to wBDX and vice versa.
Security and Network Economy
Burning coins can help to reduce some security concerns. For example, if there are surplus or unused coins that constitute a security concern, they might be burned to mitigate that risk.
Burning Mechanisms in Beldex
A crypto burn is intentional and irreversible withdrawal of coins from the circulating supply. This scarcity-driven value growth is a fundamental economic theory that might add to a cryptocurrency’s desirability. Below are some of the burning mechanisms on the Beldex network.
Burning of Flash Transaction Fee
In Beldex, the supply of the BDX coin is reduced by employing various burning mechanisms. These may include utility based burning, intentional burning and algorithmic burning.
At present, there is one utility based burning active on the Beldex network — the burning of the Flash transaction fee. The user pays a minimal fee in BDX for transactions made on the network. This fee is automatically burned on-chain as it is sent to a Beldex wallet whose seed phrase is unknown.
No one can access these coins after they are transmitted to these wallets or addresses. They also cannot be utilized to conduct any type of transaction. As a result, the tokens become obsolete and are no longer in circulation.
A prominent motivation for adopting a crypto fee burn is a deflationary economic paradigm. The purpose of this technique is to gradually reduce the total supply of cryptocurrencies. This is in contrast to inflationary token economic models, in which the quantity of tokens is always increasing. However, since the fee on the Beldex network is considerably low to begin with, only a small portion of the circulating supply is removed from the Flash fee burn.
Burning of BNS Fee
The BNS Fee, which is the fee paid by the user to the Beldex network for the purchase of BNS names and domains, is burned and removed from circulation. There are two kinds of BNS fees that a user pays the network. One is for the purchase and renewal of BNS names and the other is for the transfer of ownership.
BNS Fee
The BNS purchase and renewal fee is the subscription fees paid by the user. The subscription fees is paid on a regular basis as follows,
1 Year: 650 BDX
2 Years: 1000 BDX
5 Years: 2000 BDX
10 Years: 4000 BDX
Thus, the burning mechanism here depends on user adoption. As more and more of the Beldex community adopts BNS names, a corresponding amount in BDX is withdrawn from the circulation.
Transfer Fee
The BNS transfer fee is the flat fee of 50 BDX which is levied by the network for the transfer of BNS name / domain ownership from one wallet to another.
More on how the transfer fee works can be found in this article: BNS Development Update.
Other Types Of Burning Mechanisms Used In Cryptocurrencies
Apart from utility based burning, there are several other sorts of burning processes that can serve various objectives. Here are some examples:
Token Buybacks and Burns
Certain projects buy back their native coins/tokens on a regular basis using a percentage of their income or reserves. These repurchased coins are then burnt, lowering the total amount in circulation. This method is frequently employed by projects in order to restore value to coin holders while increasing scarcity.
Burning Mechanisms in Smart Contracts
Coins can be configured to incorporate burning mechanisms directly in their smart contracts. A smart contract, for example, may be programmed to automatically burn a proportion of coins with each transaction, adding to a progressive drop in supply.
Community-Based Burning
As a kind of engagement or reward, projects may involve their community in burning methods. For example, as part of a governance process, members of the community may vote to burn a specified number of coins/tokens.
While the above methods may not be in effect currently on the Beldex network, the team and the community will explore them in the future.
To conclude, BDX burn provides a number of advantages to the Beldex project. The most explicit advantage is the economic incentive for the coin holders. While there will be an expected gain in worth as a result of the scarcity caused by burning, there may be other implicit advantages such as enhancing community confidence in the Beldex project.
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