We all are in crypto world for profits. There are several ways to profit in crypto world i.e trading, staking ,mining , arbitrage etc. Well then there is another way to profit from buying crypto currencies that keeps burning periodically. Sounds funny but not .
Coinburn is a method of sending particular cryptocurrencies to a public address where those coins cannot be spent or retrieved because it is impossible to obtain private keys for such addresses. It is like trying to open a bank vault without having vault key or pass code.
In short it is a method of removing the coins from circulation on permanent basis by decreasing its overall supply and to slow down its inflation rate. It is a way to quickly increase the value of the coin. It is one of the cryptocurrency trend. For those who are new to crypto world coinburn is similar to stock buyback in traditional finance.
Coinburn is usually done for following reasons:
1) Creation of new coins****( Proof of burn)****
Proof of burn is an alternative consensus algorithm to Proof of work Proof of stake. Many experts believe that Proof of burn uplifts the longterm investment in a project . Miners who burn coins have an advantage to solve and mine the next block.
For example , Counterparty (XCP) is a cryptocurrency which was neither mined nor sold at an ICO but was generated by burning Bitcoins .For more info checkout https://bit.ly/30O9VQ6
2)Rewarding the coin holders
Coinburn is done to create a scarcity so the holders benefit from it. Countries like USA doesn't allow the coin holders to receive direct dividends from different cryptos so this is another way of rewarding the coin holders.
For example, Crypto currency exchanges like Binance and Kucoin employs coinburn of their respective tokens BNB and KCS every quarter.
3) Destroying the unsold coins after ICO
All the coins are not sold during token sale / ICO. The coin value appreciates after ICO and the remaining unsold coins gives the company an advantage to sell those coins in free market for higher price which is unfair . So most companies practice coinburn and exhibit their fair play.
There are some disadvantages of coinburn as well. Some experts believe that burning of coins are a waste of previously established value. There is no guarantee that the Proof of burn miners will recover the actual value of burned coins thus making the investment risky unless a reputed company/ Exchange like Binance or Kucoin.
To conclude i think coinburn is a great concept because holding some of these coins almost guarantees decent returns. I hold and trade both BNB and KCS .