The blockchain technology was developed with transparency in mind, allowing any transaction to be accessed and verified by anyone. While this eliminates data tampering, it also doesn’t allow for the removal of tokens once they’ve been minted. Every NFT that’s uploaded to the blockchain is deemed immutable. This means it can’t be changed and will live on the blockchain forever.
Since there is no way to remove or delete a token, the concept of burning an NFT was established. To burn an NFT, it must be sent to a private or null address appropriately called an “address eater” to which no one has access. This allows for the NFT to be removed from circulation and become totally inaccessible to everyone. This doesn’t affect past transactions leading up to the burn, but it does make the NFT unusable indefinitely.
Why you may want to burn an NFT
There are three main reasons why you may want to burn NFTs: to manage the supply and demand of tokens; to rectify minting flaws; or to increase the value of the remaining NFTs in a collection through gamification.
Decrease supply and increase demand
One of the main goals of burning an NFT is to reduce supply, which increases demand and scarcity. Just like with any other collectible, scarcity usually drives up the price and value of the remaining NFTs.
Burning NFTs also prove to new and existing owners that their investment will not be diluted by a plethora of similar tokens. This is vital in building a solid relationship with NFT investors, based on trust and confidence.
Delete due to minting flaws or errors
Another common reason to burn NFTs is to correct minting flaws, errors, or overproducing minted tokens. Just like in any other industry, mistakes can happen. This process provides a simple, but sometimes costly, solution for developers to fix before additional problems ensue.
Gamified NFT burning
Marketplaces often use a gamification strategy to incentivize NFT owners to burn their tokens in exchange for rewards. For example, NBA Top Shot often holds Crafting Challenges that encourage users to burn Moments from their collection to craft a new high-value reward, permanently reducing the supply of each Top Shot Moment involved.
Also, NBA Top Shot has recently concluded its “Great Burn,” effectively removing over two and a half million of previously unreleased NFT moments from its total supply. This ensures that the NFTs that are already in circulation remain as limited and special as they can possibly be.
How to burn your NFT
In order to burn an NFT, it must be made inaccessible to everyone on the marketplace. This is done by sending each token to an unreachable address which no one has access to. It’s a black hole of data that can never be recovered.
Most NFT marketplaces make the NFT burning process simple. If you’d like to burn an NFT, you can do so by logging in to the marketplace where you minted the token. Locate the NFT you’d like to burn, navigate to settings, or in some cases your contract, then look for the burn function.
Additionally, make sure to verify the null address where you intend to send your NFT. Pay attention to how long the address has been active, along with the number of incoming transactions. The outgoing transactions should always remain at zero.
Again, this is an irreversible action. Be certain you want to burn your NFT before doing so.
The cost of burning an NFT
Burning an NFT is considered a transaction so you will be charged a transaction or gas fee which covers the cost of sending an NFT to a null address. The fee itself can vary in price depending on the current supply and demand. However, you can expect to pay approximately $5 - $100 per NFT.
The act of burning an NFT also has some intangible costs. You will never be able to retrieve your NFT or the initial cost of investing in it once the process is complete.
How burning NFTs impacts their value
The value of NFTs is closely tied to demand and scarcity. The more limited or rare an NFT is, the more wanted it becomes by investors and the community. Many NFTs also come with utility—additional digital or physical benefits—which make them much more coveted.
Burning an NFT can benefit both developers and investors simultaneously. When the supply for an NFT is limited due to burning, the value of the remaining supply increases. This, in turn, boosts the demand for new investors to take action and purchase a high-value NFT. Furthermore, current holders are more likely to retain their NFTs to build up value rather than sell them off at a lower price.
To burn or not to burn?
In summary, burning NFTs by sending them to an inaccessible address is an effective tool for regulating supply and demand. And it could be the right move for you, depending on your business model or investment strategy. Not only can “burning” increase the value of your remaining NFTs, it can also build trust with investors to ensure their tokens won’t be undervalued and are worth holding on to. Burning also allows developers to rectify any mistakes such as minting flaws, errors, and a surplus of minting.
Just keep in mind that burning an NFT is irreversible. Proceed with caution before committing to this process.