NFTs were created as immutable assets that operate using code on a blockchain. But what happens when you need to destroy an NFT? There’s no such thing as a delete button when it comes to blockchain technology. That’s where the burn mechanism comes into play.
Before we talk about what it means to burn an NFT and why you might want to do such a horrific-sounding thing, let's briefly discuss what an NFT really is.
A non-fungible token (NFT) is an immutable cryptographic asset (unchanging, transferable digital representation) that is minted on the blockchain (a decentralized, public ledger) and contains a unique identification number and metadata that distinguishes them from one another—making them non-fungible.
NFTs differ from fungible assets like cryptocurrencies because they can’t be traded or exchanged at an equivalent value.
Since NFTs are blockchain-based, they are often used to remove intermediaries and connect creators with their audience in a more personal manner. Ultimately, NFTs are a vessel for simplifying transactions and leverage the creator economy to bring more value to both creators and consumers alike.
But what happens if you want to completely eliminate an NFT? After all, it’s an immutable asset secured by blockchain technology. There’s really only one solution. You have to burn it.
Burning an NFT is the equivalent of destroying it. The process involves sending a token to an un-spendable address that no one can access. Hence, once you burn an NFT, there’s no way to ever recover it.
Once a digital asset is minted on the blockchain, there’s no way to delete it. That’s why burn addresses (aka ‘eater’ or ‘null’ addresses) were created. A true burn address is really an address on the blockchain that no one has the private key to—meaning no one can gain access.
The burning concept originated from the crypto-community. The idea was that if someone who owned a large share of a particular cryptocurrency were to send the tokens to a null address, it would decrease the supply and raise the value of the token.
This concept was eventually utilized by the NFT community for a number of reasons. But mainly to decrease the overall supply of an asset.
You can compare burning an NFT to stashing bricks of gold in a vault that no one knows the code to. Except on the blockchain, it’s even more difficult to access.
There is no cost to burn an NFT on the Ethereum blockchain. However, you will need to pay a gas fee to send your NFT to the burn address.
There are likely numerous burn addresses spanning across Ethereum, but the official burn address is 0x000000000000000000000000000000000000dEaD. A quick look on Etherscan reveals that more than 8,000 transactions have gone through this address.
You can verify this is a true burn address by looking at the large number of incoming transactions in comparison to the zero outgoing.
That said, the first burn event on this address occurred on February 5, 2018. Considering the address has been active for over a number of years, 8,000 transactions doesn’t seem like a lot.
1. Reduce Supply
Similarly to burning cryptocurrency, burning an NFT results in the same effect—reducing the total supply to potentially raise the value of the remaining assets. If done correctly, this can have a long-term effect on the overall value of a collection.
One NFT project that hasn’t been too successful using the burn mechanism is WZRDS NFT. Basically, the founder enabled holders to vote on burning WZRDS NFTs listed below a certain price point.
If holders want to keep their WZRDS safe, they either have to stake them or simply store them in their wallets.
As a result, over 1,000 WZRDS have been burned of 10,000 total, while over 50% are staked. At one point the floor price had spiked from 0.15 ETH on July 8 to 3.2 ETH on July 12.
However, the heightened floor price was quick to fall just two days after mooning, where it now sits at a measly 0.02 ETH floor
2. Rectify errors
Sometimes NFT projects mess up. That or they want to avoid potential problems. Regardless of the reason, project creators turn to the burning mechanism to rectify these issues.
Perhaps one of the most notable burns to date comes not from an NFT project, but from Tether. In 2019, the US dollar-pegged stablecoin accidentally created an extra $5 billion of USDT. To rectify the issue, they immediately burned the tokens.
By removing them from circulation, Tether was able to fix their oversupply problem instantly.
Although using a burn address to rectify errors seems to be more common in the cryptocurrency space, it’s the only way you would be able to fix similar supply issues with NFTs as well.
3. Gamified trading
Some NFT brands have implemented a burn mechanism to incentivize holders to make a choice between keeping their NFT or trading it for another asset of equal or potentially greater value.
A perfect example of this gamified strategy can be found in Gary Vaynerchuk’s Book Games NFTs. This fun and innovative game originally started with a total token supply of 125,000 tokens.
As of today, there are only 102,000 NFTs remaining.
Between the Book Games Exchange (a marketplace that allows you to burn your Book Games NFT to obtain a different physical or digital asset) and the VeeFriends Series 2 new character allowlist (the only way you could mint any of the 15 new characters in Series 2), holders voluntarily burned their NFTs to receive a different asset.
This gamified burn tactic is being utilized more often by brands in the NFT space. Particularly by brands that offer a physical version of their digital assets. Not only is it something new and exciting, but it also has the effect of decreasing supply and increasing value while keeping consumers involved.
Burning an NFT is simply another word for destroying it. Since there is no way to delete an NFT from the blockchain, the next best solution is to send it to an address that no one can access. Reasons for burning an NFT include reducing the supply to increase a collection’s value, rectifying errors, and gamifying trading.
Now that you know burning an NFT doesn’t literally mean setting it on fire, does it still terrify you? The thought still terrifies me personally.
