Explaining the Shiba Inu (SHIB) coin burn mechanism

What Is Shiba Inu Coin?

Shiba Inu Coin is a cryptocurrency launched in July 2020, designed to emulate Dogecoin. Dogecoin, created in 2013, is recognized as a cryptocurrency inspired by a meme featuring a dog’s face.

Shiba Inu Coin attracted widespread attention in 2021 after Elon Musk referenced Dogecoin. This mention fueled interest in meme coins across the board, causing Shiba Inu Coin’s price to surge. As social media and influencer discussions increased, many retail investors joined the market, driving a significant price jump in a short period.

Listings on major crypto exchanges further contributed to the price rally. Development continues around DeFi (decentralized finance) and NFT marketplaces, and Shiba Inu Coin has already built a large, global fan community.

What Is Cryptocurrency Burning?

Cryptocurrency burning is the process of permanently removing already issued tokens from circulation. This is accomplished by sending the targeted cryptocurrency to a burn address—a specialized wallet from which assets can never be retrieved.

The burning process works as follows: developers or miners send tokens to a wallet that no one can access. Since nobody knows the private key for the destination wallet, burned tokens are irretrievable.

Burning typically involves a “null address,” a unique address created specifically to receive tokens being taken out of circulation.

For example, the burn address widely used on Ethereum and EVM-compatible chains (including Arbitrum, Polygon, and BSC) is “0x000000000000000000000000dEaD.” The final four characters, “dEaD,” are intentional—this vanity address was generated to include readable characters.

Often, multiple addresses are used in token burning. This practice ensures that tokens are permanently excluded from circulation by sending them to incompatible addresses.

Purposes of Cryptocurrency Burning

Token and coin burning protocols are designed for various reasons, including:

Sybil Protection

Certain blockchains use coin burning to select block creators. Just like Proof of Work (PoW) or Proof of Stake (PoS), Proof of Burn (PoB) is a critical mechanism for determining who updates the blockchain and receives block rewards. This approach helps safeguard network integrity and fairness.

Rebase Tokens

Some tokens rely on burning to rebase (adjust) their circulating supply. This mechanism is most common among algorithmic stablecoins, where the protocol expands or contracts token supply to stabilize price in response to market demand and supply.

Stablecoins

Stablecoins like USDT, USDC, and BUSD use burning to redeem coins for dollars. Users transfer dollars to stablecoin issuers (such as Tether or Circle) and receive stablecoins. To redeem for dollars, users return stablecoins, which are burned to keep the circulating stablecoins pegged 1:1 with fiat currency.

Wrapped Tokens

Like exchanging dollars for stablecoins, wrapped tokens are issued when users deposit one cryptocurrency to receive a token pegged to its value. These tokens are used across multiple blockchains or decentralized applications and may serve as IOUs for staked assets or LP (liquidity provider) rewards. When users redeem wrapped tokens for the underlying crypto or rewards, the tokens are either burned or “unwrapped” to return the original value.

Enhancing Token Value

Some projects burn part of their total supply to increase token value based on supply and demand economics. As the supply decreases and demand remains constant or rises, prices tend to increase. Burning drives scarcity, supporting higher valuations for remaining tokens.

Shiba Inu Coin Tokenomics

The Shiba Inu ecosystem is built around three ERC-20 tokens: SHIB, BONE, and LEASH. LEASH was originally designed as a rebase token pegged to Dogecoin, but its rebase function has since been disabled, capping its maximum supply at 107,646. BONE serves as a governance token, granting community members voting rights on proposals.

SHIB is classified as a meme coin, typically featuring an extremely large total supply. Most meme coins have supplies in the tens of billions to trillions, resulting in prices well below $1—sometimes even below a cent. At launch, Shiba Inu Coin’s total supply was 1 quadrillion SHIB.

In addition, Shiba Inu Coin is developing its own Layer 2 blockchain called “Shibarium.” This platform is designed to expand the Shiba Inu ecosystem by improving transaction speed and security.

Key features of Shibarium include:

• Serving as the core infrastructure for the Shiba Inu ecosystem
• Utilizing Shiba Inu Coin for transaction fees
• Implementing a PoS (Proof of Stake) consensus mechanism

Shibarium’s development is advancing Shiba Inu Coin’s tokenomics and forming a broader economic ecosystem.

Why Is Burning Necessary for Shiba Inu Coin?

Shiba Inu Coin was created in August 2020 by Ryoshi (a pseudonym) and several collaborators. In May of the following year, the creators sent half of the SHIB supply to Ethereum co-founder Vitalik Buterin—a pivotal event. Buterin burned 90% of the SHIB he received, which amounted to over 40% of the total supply (about 410 trillion tokens).

Following Buterin’s burn, Shiba Inu Coin’s price climbed nearly 40%. This result led the creators to commit to ongoing token burns with a price target of $0.01—an important initiative to reward loyal holders.

To reach the target price with a market cap equivalent to Bitcoin’s, about 95% of the original SHIB supply would need to be burned, leaving roughly 55 trillion SHIB in circulation. This demonstrates both the challenge of hitting the price target and the need for continuous burning.

How Shiba Inu Coin Burning Works

Unlike many protocols, there is no standardized system for SHIB token burning. The burn rate for Shiba Inu Coin is entirely community-driven.

Token burning can occur through various means, such as:

• Using music streaming services
• Playing games
• Making purchases in physical stores
• Ad revenue
• Watching YouTube videos

For example, when users engage with services like music streaming or search engines, providers can allocate a portion of ad revenue to burn SHIB tokens. Similarly, revenues from gaming, streaming, and retail purchases can fund SHIB burning.

This community-led system enables SHIB holders to boost token value through everyday activities.

Shiba Inu Coin Burn Portal and Its Mechanism

Developed with Ryoshi’s involvement, the ShibBurn portal rewards users with another token for burning SHIB. After Ryoshi’s departure, the Shib development team took over the portal and integrated it with ShibSwap.

Within the first five days of launch, SHIB holders burned 20 billion tokens using ShibBurn, which allows holders to send SHIB to designated burn addresses.

ShibBurn was inspired by Vitalik Buterin’s $6.7 billion SHIB burn in May 2021. The portal provides three burn addresses: the address used by Buterin, the address for ShibaSwap listings, and the “black hole” address (the Ethereum genesis address).

Using multiple addresses enhances both transparency and reliability in the burn process.

Benefits of Shiba Inu Coin Burning

The main benefits of Shiba Inu Coin burning are as follows:

Increasing Value by Reducing Supply

Shiba Inu Coin’s original total supply of 1 quadrillion SHIB has been reduced to 599 trillion through ongoing, community-led burns.

Reducing supply boosts scarcity and can support higher prices. In fact, Shiba Inu Coin’s price increased about 100-fold between October 2021 and January 2022, a surge largely attributed to supply reduction via burning.

From a supply and demand perspective, reducing available tokens typically has a positive impact on price.

Community Engagement

Burning is conducted by the community, giving holders a sense of participation and unity.

The process also generates buzz, boosts visibility, and can drive price appreciation. A vibrant community attracts new investors and accelerates overall ecosystem growth.

Is Shiba Inu Coin Burning Effective?

Projections suggest it could take 24 to 7,000 years for SHIB to reach $1. This is an extremely long timeline. However, even without dramatic increases in the burn rate, SHIB’s existing mechanisms may support gradual price appreciation.

It is overly optimistic to believe that burning a few thousand dollars’ worth of SHIB will move a multi-billion-dollar market cap. In reality, sustained, large-scale burns are necessary.

Still, the price rally following Buterin’s burn of nearly half the supply demonstrates the value of supply and demand economics. Major burn events send strong signals to the market and attract investor interest.

In the future, more efficient burning mechanisms and community expansion may further enhance the effectiveness of SHIB burning.

Conclusion: Burning Is Essential for Shiba Inu Coin

Cryptocurrency burning is a mechanism in which developers or miners permanently remove tokens from circulation. Since no one has access to the private keys for burn addresses, burned tokens cannot be recovered.

Reducing supply via burning increases scarcity, which can lift or stabilize prices. For Shiba Inu Coin, burning is a crucial component of its tokenomics.

Through a community-led burn system, development of the Shibarium blockchain, and ongoing ecosystem expansion, Shiba Inu Coin is evolving beyond the meme coin category. Both the coin and its burning trends will remain in the spotlight going forward.

FAQ

What is the SHIB token burning mechanism? Please explain the basics.

The SHIB burning mechanism permanently destroys excess tokens to reduce supply and increase the value of the remaining tokens. Regular burns shrink circulation, supporting price appreciation.

Why might burning SHIB tokens increase their price?

Burning SHIB reduces the circulating supply. If demand stays constant, reduced supply can push prices higher by increasing scarcity, supporting long-term value growth.

How can I participate in the SHIB burning mechanism? What are the methods?

To take part in SHIB burns, hold SHIB tokens and send them to the official burn portal or use a burn-enabled wallet. Some mechanisms also automatically burn a portion of transaction fees. For full details, see the official website.

How many SHIB tokens have been burned so far? I want to know the burn history and progress.

Over 310 million SHIB tokens have been burned to date. The latest burn rate jumped 4,677%, and burning continues. For the latest history and progress, check official channels.

How does the SHIB burning mechanism contribute to the long-term success of the project?

The SHIB burning mechanism curbs inflation by reducing supply and increasing scarcity. This supports investor confidence, long-term value growth, and sustained project development.

What is the difference between burning and other deflationary mechanisms (e.g., staking rewards)?

Burning permanently removes tokens from circulation to reduce supply, creating a deflationary effect. Staking rewards, by contrast, provide holders with yield by locking or delegating tokens. Burning decreases supply; staking rewards primarily incentivize holding.