Burn or build? What would you chose?
Hi,
there are a lot of discussions in diverse crypto projects, where some people are urging teams to burn stakes.
Well, burning is something irreversible and that stake would be forever gone. The biggest advantage is that it reduces inflation and by doing this increases somehow the scarcity, which shall bring the token price higher. I used price, not value, intentionally.
On my basic economic view, as I'm not a financial advisor, and everything that I write, is from my noob perspective. Please treat everything with a grain of salt. So, in my basic economic view, value is created or increased, when something is developed, not by destroying something.
The team that has the funds, can use them, to pay for services, that bring additional feature, improve the project and help to increase traction. That is how I would see value increase, use the funds to build, not to burn.
From another perspective, there are two types of tokens, limited and unlimited supply. For limited supply, I would suggest a locking mechanism, and use of tokens in a smart way. On a long term perspective, most limited tokens will be burned anyway, by accidents, loss of keys, or death of the key holder. This is to be seen on a 20-30 year time span, and crypto is not that old, but if looking long term, that would be the case. On the unlimited supply, the reason that makes most sense for a burn, is hyperinflation. If too many tokens are printed, and there is a lot of dumping, this might help on slowing the price fall. Here the best would be to introduce a slower print mechanism, then burning. Or as a second option, put a burn tax on every transaction, like the VAT we have on the FIAT market.
As mentioned in a past article, I treat crypto as a business. I'm not a political activist or anarchist, and see crypto as an economical evolution to the current monetary system. People used to trade with glass shards and pebbles in the past, till coins appeared, after the banknotes and in the past year, electronic money. Crypto is the revolution to that.
As said, as I'm not an expert, burning can have more benefits, which I don't see. Till now, no burn maximalist could come with other reason, than avoid inflation and increase price by scarcity, which is a short term solution, not one for the long road.
How do you see it? Burn or use the funds to build? Why?
Posted Using InLeo Alpha
Yes, it's clearly an evolution. But any systematic change can cause rapture, chaos, early or late adaptation to change, crisis, manipulation of the markets and many more. These games are already played in Web3 as well and will be reinforced once the mass adoption for crypto will start everywhere. So we need to position ourselves in a collective safe place like Hive. Thanks for this article, Alex
Better to use the funds and build just from my point of view. If you build we will have more features to bring in money from the outside people get more interesting but if you burn only the ones who hold the crypto itself will know about it (most of the time)
Anyway I'm not an expert maybe I'm right maybe I'm wrong.
This depends on the situation and on the circumstances. Sometimes both. Burn and build.
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It really depends on the project. But for one with a small budget, I would discourage burning the funds that can be used for development.
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For me, staking and locking makes the most sense. If the token is unlimited in number with no cap what good does burning actually do? Stake the tokens to earn and for later.
It depends on the context. Some projects like exchanges might be more inclined to burn.
Build of course
Burning inflation benefits all stakeholders exactly the same way inflation dilutes them.