Cardano might soon have a token-burning mechanism. That’s what information contained in its recent status updates seems to suggest.
The status update, which is part of a new initiative by the company to release updates about Cardano’s development every week, shows that two of its teams are working on a token burning mechanism.
The report reads that the Adrestia team continued working on finalizing a new transaction workflow to add token minting and burning capabilities. It further added that the Hydra team is considering options for token minting and burning within a Hydra Head along with scenarios of using tokens instead of datums.
With different teams working on integrating token burning, the foundation appears to be pursuing this aggressively. Adrestia was launched in 2020 to make it faster for other chains to integrate and interact with Cardano. The team worked on building the web APIs and libraries that make it easy for developers to access and deploy on Cardano.
On the other hand, Hydra Heads was recently launched on Cardano testnet even though the theoretical paper has been published since last year. It describes a collection of Layer 2 solutions to improve network scalability and security.
Token burn is one of the mechanisms used by the crypto community to make an asset deflationary as it permanently removes a certain amount of tokens from circulation. It’s similar to stock buybacks and most times helps to increase the price of the token because it ensures scarcity.
Per Santiment data, Cardano is one of the five fastest developing networks in the last 30 days. But the performance and improvements are yet to reflect on the price, as it is still trading for less than $1 as of press time.
Crypto Assets With Burning Mechanisms
Several crypto projects have implemented a burning mechanism to ensure the scarcity of their tokens. These projects include BNB, Avalanche, Ethereum, Ripple Protocol, Shiba Inu, and more.
Ethereum helped to popularize this method when it implemented the EIP-1559 upgrade almost a year ago. Since then, the network has burnt almost 2 million ETH which is worth roughly over $5 billion.
BNB also has its own coin-burning mechanism that seeks to reduce the total supply of the asset by 50%. It has two burning mechanisms; the quarterly burn and the auto-burn.
The quarterly burn has been in effect for a while now, and the network had its 18th burn as recently as this January. On the other hand, the auto-burn mechanism automatically determines the amount of BNB to be burned using the price and number of blocks generated during the quarter.
Other digital assets like AVAX, XRP, Shiba, and Luna also have token-burn mechanisms. In fact, this method is gradually becoming a norm for crypto projects.
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