No, cryptocurrencies aren’t literally being set on fire. But they are being deleted from the ecosystem.
The term ‘coin burn’ is used when coins are removed from the overall supply permanently.
It also makes the coin in question more valuable due to the simple economics of supply and demand. If there’s less of them to go around, the coins that remain become expensive.
So, as an investor, a burn means your holdings will gain value.
If this sounds familiar, it’s probably because the concept is similar to a publicly traded company buying back shares – seen quite commonly in Indian IT stocks.
Ideally, when publicly traded company uses its cash on hand to repurchase shares of its common stock, it reduces the total number of shares in the market.
In doing so, the remaining shares are scarcer than before, and thus more valuable. And, in the case for publicly traded companies, a buy back can improve earnings per share since there are fewer shares outstanding to divy up the income.