How To Burn An NFT?

 

NFTs were designed to be immutable assets that operate by coding on the blockchain. But what happens if you have to dispose of an NFT? There aren't deletion buttons in the world of blockchain technology. This is why the burning mechanism steps in.

 

Before we get into the meaning behind burning an NFT and the reasons you may consider doing such a terrifying thing, let's briefly examine what an NFT is.

 

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What is an NFT?

 

Non-fungible currency (NFT) is a cryptographic investment that has no change (unchanging digital representation that can be transferred) that is created by the blockchain (a decentralized public ledger) and has an identification number unique to each one and metadata that differentiates them from each other, making them ineffable.

 

NFTs differ from fungible investments like cryptocurrency because they cannot be exchanged or traded for an equivalent price.

 

Because they are blockchain-based and are used to cut out intermediaries and link creators to their customers in a more intimate way, in the end, NFTs are a vessel to make transactions simpler and use the power of the creator economy to offer greater value to consumers and creators alike.

 

What happens if you would like to eliminate an NFT? In the end, it's an immutable asset protected with blockchain technology. There's only one way to solve it. Burn it.

 

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What is Burning an NFT?

 

The process of burning an NFT is like dissolving it. It involves sending the token to an unspendable address that nobody can access. Therefore, it is impossible to recover once you've burned an NFT.

 

After a digital currency has been created on the blockchain, it is impossible to erase it. This is why burn addresses (aka "eater" or "null addresses) were developed. An actual burn address is an account on the blockchain to which nobody has access to the private key, which means that no one can access it.

 

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The idea of burning originated in the crypto-community. The concept was that if an individual who owned a large portion of a certain cryptocurrency was to transfer the tokens to an address that was not valid, it would lower the number of tokens available and increase the price of the coin.

 

The idea was later adopted by those in the NFT sector for various reasons. However, it was primarily used to reduce the total amount of assets available.

 

It's possible to consider the process of burning NFT to storing the gold bricks in vaults nobody knows the code to. But on the blockchain, it's more difficult to gain access.

 

Does it Require Any Cost to Burn an NFT?

 

Burning your NFT using Ethereum. Ethereum blockchain. You will, however, have to pay a fee for gas to transfer the NFT to the address for burning.

 

There are likely numerous burn addresses spanning across Ethereum, but the official burn address is 0x000000000000000000000000000000000000dEaD. A quick search at Etherscan shows that more than 8000 transactions have been conducted via this account.

 

It is possible to confirm that it is a genuine burn address by examining the high volume of inbound transactions compared to zero outgoing transactions.

However, the first burning event for the address was on February 5, 2018. Given that this address was operational for several many years, an amount of 8,000 transactions may not seem like much.

 

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3 Reasons to Burn an NFT

 

1. Reduce Supply

 

Like burning cryptocurrency burning an NFT will have the same result, reducing the amount of Supply, which could boost the value of remaining assets. If done properly, it can affect the value of an entire collection.

 

A single NFT initiative that's not proved very successful with its burn method is WZRDS NFT. The founder allowed holders to vote on burning WZRDS NFTs at a price below a specific threshold.

 

If the holders wish to protect their WZRDS, they must put them on stakes or keep these in their purses.

 

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In the end, more than 1,000 WZRDS have been burnt out of 10,000, and more than 50% are held. At one point, the floor price was soaring between 0.15 ETH on July 8 to 3.2 ETH on July 12.

 

However, the increased floor price quickly started to fall within two days after morning and is currently at just 0.02 ETH floor

 

2. Rectify errors

 

Sometimes NFT projects fail. They may also want to prevent potential issues. No matter the motivation, project managers resort to burning mechanisms to address these issues.

 

One of the most well-known fires reported to date is no NFT venture; however, it comes from Tether. In 2019, Tether's US stablecoin pegged to the dollar accidentally generated an additional $5 billion USDT. To fix the issue, they immediately destroyed the tokens.

 

After eliminating them from circulation, Tether was able to solve the problem of their Supply being oversupplied immediately.

 

While using a burn address for rectifying errors may be more prevalent in the crypto space and is the only way you could solve similar issues in Supply with NFTs too.

 

3. Gamified trading

 

Certain NFT brands have implemented a burning system that encourages holders to keep the NFT and trade the asset for another asset of the same or possibly more worth.

 

An excellent illustration of this type of gamified strategy is within Gary Vaynerchuk's Book Games NFTs. This exciting and unique game began with several tokens, 125,000.

 

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At the time of writing, the number of NFTs left.

The Book Games Exchange (a marketplace that lets you use the Book Games NFT to get other digital or physical assets) as well as in the VeeFriends Series 2 new character allowlist (the only way to mint one of the fifteen new characters from Series 2) holders have voluntarily burned their NFTs to get another asset.

 

This gamified burn strategy is used more frequently by brands operating in the NFT sector. Particularly by companies that offer physical versions of digital content. Not only is it fresh and exciting, but this also comes with the advantage of reducing the quantity and increasing value while engaging consumers.

 

Final Thoughts

 

A burning NFT is just another term to describe the process of dismantling it. As there is no method to erase any NFT off the blockchain, the ideal option is to transfer it to an account that nobody can access. The reasons for burning the NFT are to reduce the amount of NFT available to boost the value of a collection and resolve errors and gaming trading.

 

Now that you understand that burning an NFT does not necessarily mean lighting it on fire, is it still terrifying you? It still scares me personally.

 

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