Will Tron’s (TRX) 1 billion token burn affect its price?

 

The day when Tron (TRX) will officially become a “free, autonomous and self-governed” cryptocurrency is almost upon us. As per the plan set by the Tron foundation and its leader Justin Sun, Tron Independence Day will commence on June 25th. To commemorate this event, Tron foundation has decided to organize a token burning event.

The concept of money burning has been explained by experts and casuals alike. At first thought you might imagine a loaded mobster or an oil sheikh who is so rich that he starts burning bills simply because he can. However there is much more behind the idea, as money burning closely relates to one of the most basic laws of economy.

Money is a good, and the price of every good is determined by its supply and demand. As the supply grows and demand remains unchanged, the price of the good should go up. The same principles apply to the digital, blockchain based crypto money.

With this context in mind, Sun announced the coin burn as a veritable way of giving back to the community. A total of 1 million coins will be burned, making this the largest money burn in history. Tron explains this further in their Medium announcement:

“TRON Foundation will conduct a burn of 1,000,000,000 TRX all at once, which is worth 50 million USD according to today’s market price. This may set the record for the most amount of money destroyed in human history in celebration of a historic moment. The amount of TRX at the beginning of mainnet launch will be reduced to 99,000,000,000TRX, and the remaining 33,251,807,524 TRX held by TRON foundation will stay locked until January 1th, 2020.”

Burning a currency is no joke, especially when you are burning 50 million USD worth of it. Tron foundation made it clear that the burned tokens will be burned from the foundations holdings, ensuring its holders that their funds will remain safe. In this spirit, a full timeline of the mainnet launch process and the accompanying burn has been detailed in the announcement above.

In short, after the mainnet launches and TRX officially moves to its native chain, the burn will also be completed and confirmed with the network’s genesis block. New tokens will be created and delivered to wallets that support the mainnet swap. The exchanges will be deciding individually when they will migrate their TRX tokens from ERC20 to TRON mainnet. After receiving TRON mainnet tokens, users can withdraw the tokens and deposit in TRON-recommended wallets and start voting.

While the burn does reduce the supply, the part that will be burned isn’t a part of the circulating supply. This means that the market supply won’t be affected by the burn so it might not have the advertised effect on the TRX price. Not to mention that there are many more elements that determine the daily token valuation. As of now the price is suffering and is in the red, mostly thanks to Bitcoin experiencing a downwards correction in the last 24 hours. We will see if this upcoming Independence Day helps TRX break out of this slump.

CaptainAltcoin’s writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner.