So here we are. There's just a day left until seeing the the #Rapids5BBurn. I've had this nagging question, it's time... Burn Clock 1 - What Exactly Is a Coin Burn & Why You Should Care.
Let's Take a Closer Look
To manage supply or not to manage supply, that is the question... Even beyond Rapids Network, how you think about inflation, deflation, or even stagflation is critical for every area in your life.
On September 30, 2020, Rapids Network will be burning 5 billion RPD cryptocurrency. I came across this info when I was reading the Rapids Roadmap, and I realized that there was more to learn.
Intellectually, I get it. Totally understand what it means to reduce the supply, but then I started to think. What does it actually mean?
It' not like there's fiat currency, or stacks of cash to light off with a match. Yet, what actually happens is totally intriguing. Hence, this put me on a path of where we are today.
According to a recent tweet, Rapids plans to live host the burn on their YouTube Channel.
What is Involved In a Cryptocurrency Coin Burn?
In a compendium of articles going back to 2018 (even further are available, I just stopped at 2018), including up to September 2020, the Coin Burn has been called everything from: Unstoppable, Newest Craze, to About Time Something Like This Happened.
When you start digging into what has been reported and written about coin burns it is really interesting.
In many ways the same thing has happened with fiat currency over time as well, but instead of actually removing currency from circulation, the markets have been inflated and deflated, which as you would expect decrease and increase the buying power of the fiat currency.
A similar proposition exists with removing a cryptocurrency coin from circulation. In essence there is an underpinning assumption that takes place.
Maintaining the strength and vitality of the cryptocurrency coin / token.
I realize that quite often in the space, the purists are easily offended when we call a token a coin and a coin a token. The digital assets are different in how they are supported, yet when it comes to a person's personal crypto wallet they may seem interchangeable.
For purposes, here I use them interchangeably. Coca-cola, Pepsi, RC Cola (that one will date some of us) and then there's what's that brand from Wal-Mart? Anyone up for a coke later?
The Nuts and Bolts
Now I don't purport to know what the exact method Rapids Network will use in their live event, but I can speculate based on research from other coins, different tokens and what would be a common theme across them.
Now just to keep us all in a similar frame of thinking let's remember that a coin burn is similar to a stock buy-back in traditional finance. Not the same, just similar by reducing supply.
If a company wants to bolster the performance of their stock price, they can buy back their own shares from the open market to drive up the price. Investors see this growth and the company can sell back later when it needs cash flow.
We are talking about cryptocurrency now, so of course there are some big differences. Big similarities too.
The Eater Address or an irretrievable public wallet, is a term that comes up a lot. So when a project is burning any amount of coins they are sent to one of these addresses where the coins are effectively retired.
All that to say, they are unable to re-enter the circulation and they are available for viewing on the project's explorer. Sounds pretty simple right?
In general that's the case. When it's a one-time shot, there is some execution of the protocol to send the pre-identified volume to the eater address where it will stay in perpetuity.
Where it becomes interesting is all of the different variations of projects and how they approach the different burns. For example BINANCE has pledged to burn 100 million BNB overall and does so on a quarterly schedule.
Kyber network has a small percentage that burns with every transaction as does Ripple. Stable coins have yet another approach by where a small amount is added then removed with each transaction.
Whatever the process being used, they are all focused on managing supply and from there the other reasons vary.
Back to #Rapids5BBurn
If you have kept up with this countdown you have seen some of the other topics and reasons to be excited about Rapids Network. There is obviously something going on with the project.
It had to be earlier this year, where I was writing an article about my experience with Aircoins and I came across a Rapids coin. I was outside getting steps in for the day and was completely surprised, perplexed and curious. If I remember correctly it was the same day I found part of a Lumen, DGB and Ghost all with in a couple block area of each other. I knew the others, but hadn't come across RPD yet.
As I started look more and more at the project, the community and some of the opportunity with the Rapids project buzzed with an air of excitement. Also, I had comments on that original article saying, "hey, why don't you write something on Rapids, it looks like a really intriguing project".
Alas here we are at the end of this journey as well as the beginning of another. In the next 24 hours or so Rapids will be live streaming their Burn event on their YouTube channel. It looks to be an exciting time.
Combine that with some of the recent announcements with the Burnley F.C. and the active Rapids Community, it's easy to be jazzed up on the happenings.
NOTE: Thanks for following along on this series. I have found that covering a topic for more than a single writing helps develop different ideas, sub-topics and categories in the conversation. If you watch the live stream event, it would be great to get your feed back in the comments. Thanks again!
