RE: Steem Debates #2 : Burnsteem25
I am still of the opinion that burning tokens is not a good idea. People don't toss valuable things in the trash, people throw worthless things in the trash, so why would you do that with a supposedly valuable token? It is not clear at all to me that it helps the price, there's a hand-wave-y argument that it ought to but I haven't seen much analysis that it actually does. Traders probably aren't monitoring global supply numbers, so how could the information that there are a few less tokens in the ecosystem than expected impact their behavior? Having the burn happen at the point of reward-granting isn't as bad (there's an element of the author and voters agreeing to a lower amount of inflation) but I still think we'd be better off thinking through the economics than chasing the "burn everything!" hype train.
Token burning is extremely important in any crypto system for the simple reason of the law of supply and demand. If a product is abundant, its price goes down, if a price becomes more expensive, the price tends to rise. Obviously, this is not the only factor for a token to increase in price, but it is a very important one.
Global supply is a simplified abstraction, sometimes it can make sense to think about "producers" or "consumers" as if they act collectively, but an actual economy happens in the aggregation of lots of individual transactions. "Global supply" doesn't directly impact any individual who wants to buy or sell Steem, the only thing that matters to them is whether they can find someone willing to transact with them at a price they're comfortable with. Somebody else burning Steem in private mostly has no impact on that. It is not clear at all to me that "token burning" should be considered any more important to a cypto system than dollar-burning or euro-burning are to those systems.
But that depends on what kind of "individual transactions" we mean. If there are a lot of people selling, obviously the price goes down. If there are many people buying, the price rises because the asset becomes more expensive.
The global supply is affected because if there are many holders of the token it will be very easy to find a lower price; but if you really want to buy Steem as a store of value and there are not many sellers, then obviously the price will be much higher.
And maybe that person doesn't feel "comfortable" with the price, but at the end of the day it is the price that the market dictates. In that sense, flaring plays an important role in reducing the total supply and balancing the price by sending it up. At least that's the theory, friend @danmaruschak
Trades are symmetrical. A buy only goes through if it matches with somebody else's sell on the other side. And when you're "buying" one currency with another currency that also looks similar to "selling" the second currency for the first one. There is no one "price" of a coin on the market, each transaction has a "price" that the two parties agree to. We often treat the most recent trade or some average of recent trades as "the" price but that is an abstraction, not reality. The reality is that each individual market participant has their own preferences around whether they want to acquire or trade away particular coins. There's no centralized bucket that all sells go through or all buys go through that push a quantity called "price" around. Sometimes you can think that way as a rule of thumb, but it's not the way the actual market operates.
The question is not "is global supply affected", that's backwards. You are trying to argue that global supply affects something else: the buying and selling decisions of market participants.
The price is what buyers and sellers agree to. There is no separate entity called "the market" that dictates what "the price" is, that's a simplified abstraction of aggregating lots of individual decisions.
Yes, a theory that's probably wrong.
Conventional crypto theory usually says burn = good.
Which may be the case but we have never reached anywhere near a critical burn mass to really test that theory.
Although it is not the only variable to consider, flaring would work if demand remains constant or increases.
There are very few examples of this, although we could name BNB, however, Binance does its burning every 3 months. As it does? From his profits, he buys back BNB which is sent to the Black Hole.
It should be noted that Binance BNB began burning its token in 2017, but it was not until 2021, when it burned 3,619,888 BNB, that the price began to skyrocket.
By that time, Binance burned over $165 million and will continue to do this until it has burned through half of the initial supply, which was 200 million BNB.
Burning is only one variable in the equation, however, it is curious that BTC does not have scheduled burning nor has any of this digital asset ever been burned.
In fact, I made a publication about it, and with your permission, my dear witness, I will leave the link here so you can know my appreciation.
https://steemit.com/hive-127586/@oneray/por-que-deberia-seguir-quemando-parte-mis-ganancias