Stellar, the world’s tenth-largest cryptocurrency by market cap, has seemingly jumped in price by more than 20 percent over the past day following an announcement by executives that the currency would undergo a massive “burn.”
Stellar Is Up in Flames
The process of “burning” crypto involves deleting it from existence. It does not reside on any blockchain or ledger, nor can it be purchased or added to any wallet address. The currency is gone, and it can never be bought, sold or traded in the future.
Stellar Development Foundation chief Denelle Dixon explained:
We didn’t start by wanting to burn. We started by asking, ‘what do we need.’ As much as we wanted to use the lumens that we held, it was very hard to get them into the market.
Following the announcement of the burn, the currency shot up in price. This behavior is to be expected. With less units available, the currency has seemingly become rarer and is now harder to obtain by industry standards, but the move has also led to some controversy.
Many enthusiasts claim that companies like Stellar, which burn a heavy portion of their crypto units, do so as a means of inspiring sales and boosting their statuses among crypto rankings. With the currency now less available, its rarity causes the value to increase. Thus, many traders are looking to get their fingers on available units before they run out. Sale rates improve, and the currency’s popularity shoots through the roof.
It’s a solid tactic; one that produces notable results, but many believe it’s also very manipulative. Overall, approximately 55 billion XLM tokens have been burned at press time, and the currency has added more than $200 million to its overall value.
I don’t know [how the stellar, bitcoin and wider cryptocurrency market will react]. I just don’t have a sense at all of what the market response is. From my standpoint, it’s how the ecosystem feels about it. We got a lot of positive response from the ecosystem because we are rightsizing what the foundation has and what the foundation holds.
Get Rid of the Excess
At the time of writing, the Stellar Foundation still controls more than 30 billion XLM tokens, suggesting that it’s along the same lines as Ripple and probably not a decentralized coin. In a blog post, the organization wrote:
We [have] burned five billion lumens from our operating fund. It now stands at 12 billion lumens. This reduction isn’t in any way a retreat from our mission. It’s an acknowledgement that we owe it to the ecosystem, to the network, and to ourselves to be as efficient as possible in our work… The lumens now in public hands are there because we’ve worked hard to get them there over the last four years.