Token Burn

Token burning permanently removes tokens by sending them to an address with no private key, a burn address. Supply falls. Manual burns come from a treasury. Automatic burns happen on each transaction. Ethereum's EIP-1559 burns part of every base fee instead of paying it to validators. When activity is high, Ethereum can burn more ETH than it issues, so net supply falls.

Buyback-and-burn uses protocol revenue to buy tokens on the market and destroy them. That is buy pressure plus lower supply. The thesis only works if demand holds. Burning 50% of supply does nothing if demand drops 50%. Compare burn rate to emission. Burning 1% a year while emitting 5% is still 4% inflation. Visible burn counters are often marketing.

Lasting deflation needs burns that exceed new issuance on a sustainable basis. Ethereum implements burning through EIP-1559, where a portion of every transaction's base fee is burned rather than going to validators. During high network activity, Ethereum can burn more ETH than it emits, making it deflationary.

The investment thesis: reduced supply with constant or growing demand increases per-token value. The effectiveness depends on burn rate relative to emission rate, burning 1% annually while emitting 5% still produces 4% inflation. ETH base fees are burned. Some tokens send supply to a dead address. Burns only matter if issuance does not replace them.