Understanding what token burning consists of

Hello ReadCash community , it is but that you are having a great week. Take good care of yourselves, even though things are a little better, we must continue to stay safe.

Within the DeFi financial system, and in the crypto environment in general there is activity that is carried out with the goal of positively affecting the economics of some project. Luckily, the economics of cryptocurrency projects, and that aspect in particular have more leeway than when it comes to traditional economics.

I am talking specifically about token burning . This activity consists of literally disappearing, taking out of circulation a quantity of a specific token, so that when there is less quantity in circulation, its price can go up.

I think that, in a certain way, we all know the effect that the little existence of something has on its price. For example, tokens that are produced by the millions, and never stop being issued, are more likely, with the passage of time, to tend to fall in price, as happens with the dollar, the euro, or any other fiat currency. Although we know that there are some cryptocurrencies that, despite the fact that their issuance will be indefinite, do not stop rising.

But, in general terms , when there is little of something, when something is scarce, it costs more to get it and as a consequence its price will rise. This is not a new strategy. It is something that many projects apply precisely for that purpose, to raise or maintain the price of the cryptocurrency.

But does it always work? , obviously not. Because it is not the only thing that is necessary for a crypto to maintain a specific price. For example, its usefulness, people's confidence in the project, the number of tokens produced daily, among other things.

But, even so, it is still a fundamental part in many cases, of the economy of many projects. I want to bring a recent example of a project in which I am participating from the beginning, where you can clearly see the effect of token burning.

As you can see, the WOX token, from the wox-defi project until March 22, had a ratio of 3 TRX for each WOX token. That day, investors would have the possibility to withdraw their profits, if they so wished, which meant that there was a massive sale, as usually happens with the beginnings of this project, and the price dropped abruptly.

Taking the price of WOX to its lowest level. But, yesterday, March 29, a burn of almost 30,000 wox tokens was carried out, and it can be seen how the price came to balance practically equal to one TRX.

This is how token burning works. Thank you very much for reading my post.