The process of burning digital currencies means removing a certain portion of the cryptocurrency from circulation permanently, by sending it to a non-refundable wallet address (burn address). This process is done for several reasons, the most important of which are:

1. Reducing supply and increasing scarcity (deflation)

• When the amount of coins in circulation is reduced, the currency becomes more scarce, which may lead to an increase in its value over time, especially if demand for it increases.

• This concept is similar to what happens in traditional financial markets when buying back shares (buyback) to reduce the number of available shares, which may lead to an increase in their price.

2. Controlling inflation

• Some projects carry out burning operations to maintain the stability of the currency and reduce the rate of inflation, especially if the currency depends on the continuous issuance of new currencies.

3. Motivating investors and increasing confidence

• When a company or project burns part of its currency, this may be interpreted as a positive indicator of the team's commitment to developing the project and supporting the value of the currency, which attracts investors.

4. Improving Tokennomics

Some projects rely on an economic model that includes burning operations as part of their strategy to ensure sustainability, as is the case with coins such as BNB (Binance Coin), Shiba Inu (SHIB), and Ethereum (ETH) (after the EIP update).