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[unsplash](https://unsplash.com/photos/a-pile-of-gold-and-silver-bitcoins-kM6QNrgo0YE)|
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Hello friends, welcome back to my blog, I trust you are all keeping well. Am glad you dropped by once again to check what I've prepared for you. Anyway, we would continue from our last discussion. We discussed the Eater Address in Crypto and saw how that it sync with the concept of coin Burning.
Today we would be looking at the pros and cons of burning a coin. Are there benefit attached to burning a coin, and are there also some lopsided part of this act? We would get to know all of these as we delve into today's talk.
|**Pros of Coin Burning**|
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• **Price Appreciation**: One of the major reason why coins or token are burnt is to drive up price positively such that it appreciates and even attract investors. When coin are burnt, the number of such coin in circulation reduces. In other words, the supply of such coin reduces and thereby increase demand.
• **Scarcity Creation**: Coin burning is a deliberate act of creating scarcity. We must have learnt how scarce commodity impacts the price of such commodity in economics.
The reason why sand or stones is not valued is because it's everywhere. The day stones and sand becomes a very difficult substance to get is the very day it becomes valuable and wanted.
This is why developers seek to reduce supply by all means making a considerable amount of the token circulate. All these will then drive up demand for such token and then the higher the demand the higher the price, it's a simple law of demand.
• **Investor Confidence**: Coin Burning can really help project developers sieve out real investors. The burning initiative is not usually a welcome idea by all and sundry even though the goal has been clearly spelt out for the good of all.
It's usually a long term goal for price control and appreciation of asset.
And guess what only those who share in this vision sticks by it. The funny fact about the coin burn initiative is that it attract very serious investors who are ready to go miles to see the project work out. Am glad that we are many here on the steemit platform that set most of our post to @null
[unsplash](https://unsplash.com/photos/black-android-smartphone-on-black-textile-3PyBkxgTiL0)
• **Market Stability**: Price Stability is key for every well meaning project. The price of an asset should not suffer rapid and uncontrolable inflation or deflation if not it won't be very safe to trade such asset as investors would not like to commit their resources into it.
But when market stability is the goal, such asset would see a large influx of investor which would actually boost up the reputation of such asset and improve the way such asset is perceived.
|**Cons of Coin Burning**|
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• **Volatility**: Surprised right? Well the initial phase of the coin burn activity can cause volatility although it actually for a short term and the reason is not far fetched. This initial announcement of such activity would make investors react differently especially those who do not have that long term mindset and this has a way of making the price of such asset fluctuate.
[unsplash](https://unsplash.com/photos/red-and-blue-light-streaks-fiXLQXAhCfk)
This is because investors are reacting to it. Some would have to pull out because they do not like the idea while those who have come to stay would stay through the whole process. When the 25% to @null initiative was introduced on steemit, there were different reaction but today we that stayed are enjoying the fruit of patience and perseverance.
• **Could lead to Misuse**: Coin burn activity is the kind that requires some level of trust and transparency. Many project developers have use the coin burn activity for their selfish reason.
To avoid this, there must be a clear communication as to why this activities should be embraced by investors and how it's going to be profitable for everyone who actively participate in such activity.
A good example is that of the steem ecosystem. It was openly announced...how the coin should be burnt and in what percentage and how it would impact the price and value of steem.
Many users and investors wrote extensively about the needs to embrace the idea and today we still see the impact of this activity. Just imagine what would have happened if steem wasn't controlled using this means.
• **Regulatory Scrutiny**: This is a point I also stumbled upon and felt should also be highlighted. Coin burn activities have every tendency to attract regulatory scrutiny and that is when it is not done in accordance to the already existing security laws and standards.
Adequate care need to be taken to ensure that this process do not raise eye brows, project should see to it that they follow the correct route in getting this activity done.
• **Environmental Concerns**: The process of burning coin in the steem ecosystem is quite easy and straight forward but it not really so with coin that uses the proof-of-work mechanism. It takes a whole lot of energy and computational power to get that done under PoS which could affect the environment negatively and also raise concerns.
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|**Conclusion**|
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There you go friends.I would love to wrap it up at this juncture. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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