If you have been involved in the NFT space then you have probably heard of the term burning. Although it’s a simple concept it is important to understand as it’s a core component of the NFT ecosystem.
But don’t worry. In this article, I will be covering all aspects of NFT burning so you can navigate the space with ease. So without further ado, let’s jump right in.
NFT burning is the process by which NFTs are taken out of the circulating supply. They are essentially sent to inaccessible address. This is to increase scarcity of the collection.
What is NFT burning?
As mentioned previously NFT burning is the process in which NFTs are removed from the circulating supply. As a function of blockchain technology, NFTs cannot be deleted as they are immutable assets.
Instead, they are sent to an address known as a ghost address or burn address where they can no longer be spent. The token is locked and therefore cannot be recovered. Consequently, the circulating supply is reduced.
Why does burning an NFT happen?
Protects against scams – oftentimes scammers send fraudulent NFTs to unsuspected users. When they interact with the smart contract of these NFTs they compromise their wallets and the funds are stolen. Burning these NFTs removes them from your wallet so you are less vulnerable to these attacks.
Artificial scarcity – the burning of NFTs is often done to create artificial scarcity. This shortage of tokens increases the value of the remaining tokens and therefore creates a more exclusive collection.
Increase demand – often times NFT creators burn tokens to bring attention to the selection. The decrease in supply can increase the value proposition to traders. At the end of the day, the rarer an item is the more valuable is becomes.
Remove faulty NFTs – creators often use the burning mechanism to remove faulty NFTs from the collection. Instead of preventing customers from accessing the whole collection a select few can be removed.
How to burn an NFT
Burning an NFT is a relatively simple process. Here are the following steps.
- Firstly, you need to connect your wallet and make sure you have enough funds to cover the transaction fee.
- Secondly, you need to navigate to settings and select the burn token function. If you are using the Phantom wallet there is a burn mechanic in the collectible tab. Alternatively, if there is no burn function in your wallet you can send NFTs to the ghost wallet and this will effectively achieve the same result.
- Once you have selected the burn function or the ghost address of your choosing you will need to authorize the transaction. A prompt will come up on your hot wallet or hardware wallet and you will need to approve. It is important to verify the address before approving the transaction
- Lastly, you can check the transaction on a blockchain explorer to make sure everything is processed correctly. At this stage, the transaction is permanent and irreversible so your NFT is effectively burned.
The cost of burning an NFT
The cost of burning an NFT depends on the network and the congestion. Ultimately, the cost is determined by the transaction fee used to send the NFT to the ghost wallet.
For Ethereum, it can be as little as 5 cents but at peak times it can go over a few dollars. On the other hand, for newer blockchains such as Solana, the gas fees are negligible at just a fraction of a cent.
The congestion of the network is caused by high demand. Therefore, to spend less on burning your NFT you need to pick a cheaper blockchain and avoid peak hours. You can do this by using a gas tracker such as Eth Gas Station and Solana.com.
If you want to learn more about gas fees and transaction costs. Click here to read my previous article.
Bottom line
Overall, burning is effectively removing the NFT from the circulating supply. It’s a common tactic in the NFT industry to increase demand and remove faulty tokens. It is worth noting that this process is irreversible, therefore if you are thinking of burning an NFT I would recommend taking careful consideration. I hope you found this article useful and thanks for reading.
Do you want to learn about utility NFTs? Click here to read my previous article.
