The destruction of HT and okb caused the platform token to rise again. What is the value of destruction?

On February 10, okex announced that it would destroy all the unpublished 700million okb worth more than 20 billion yuan. In response, Huo coin immediately issued a monthly destruction announcement, destroying 147million HT pieces, worth about 5billion yuan.

As the head exchange, the destruction of tokens of okex and Huo coin immediately triggered a follow-up wave in the blockchain industry. ZB, fcoin, MX and other exchanges followed suit and announced the destruction of the pass.

After the announcement, almost all platform passes that announced the destruction plan welcomed a wave of increase. As the leader of the destruction wave in February, okb reached a 25% increase within 24 hours, breaking the 5usdt threshold, and even exceeded 50% at one time; HT’s biggest increase was also more than 20%.

It can be seen that the platform pass uses the method of regular repurchase and destruction, mainly to ensure economic deflation.

Let’s see what destruction methods exist for the pass? What is the reference value and significance?

Mainstream method of token destruction

(1) Enter the token into the black hole address

Token destruction is not the physical destruction of the token, but the permanent removal of the token from the circulation market, that is, the permanent freezing of the token. At present, the most mainstream way to destroy the pass is to enter the pass into the black hole address. The so-called black hole addresses refer to those addresses where the private key is lost or cannot be confirmed. Due to the lack of private keys, the pass to these addresses can no longer be proposed to rejoin the market, and these addresses are just like a black hole. Due to various reasons such as the loss of private keys or deliberate actions, such black hole addresses exist in most public chains in the market. For example, the famous “all zero address” on the ETH public chain is an example of black hole addresses.

Black hole address is the most commonly used way to destroy platform pass at present, and it is also the scheme adopted by Huo coin and okex when destroying pass at present. For example, according to the announcement of okex platform, the okb destruction address is 0xff1ee8604f9ec9c3bb292633bb939321ae861b30.

Source: okex

(2) Use the smart contract to destroy the token and store the destruction behavior on the chain

Compared with okex and Huo coin, Qian’an prefers to use smart contract to destroy the token. In the smart contract, you can choose to use a specific token destruction function to perform token destruction. When this function is executed, as long as the judgment conditions in the function are met, a certain number of passes will automatically disappear forever.

Destruction function in BNB smart contract, source: Etherscan

The destruction function of BNB is written in the contract. When the destruction function in the contract is executed, a certain number of BNB will be permanently removed from the circulation market. All BNB destruction will be recorded in the Ethernet blockchain browser, and anyone can find them in the coin burn event.

(3) The combustion certification consensus (POB) proves the computing power by destroying the pass

The proof of burn (POB) is a current relatively cutting-edge blockchain consensus. Its core idea is to prove the user node’s investment in the network by destroying the pass, so as to obtain the right to “mine” and confirm transactions. The certificate of combustion is currently considered one of the alternatives to the certificate of interest in the future.

There are many mechanisms to realize the combustion proof consensus. The combustion proof consensus in slimcoin mining is a typical case. If slimcoin miners want to mine, they need to destroy the slimcoin originally held by the miners as fuel. The more they destroy, the greater the possibility of digging new data blocks.

In practice, this token is not the only one that can become “fuel”. For example, XCP uses bitcoin as fuel for mining. As a part of the vouchers are destroyed as “fuel”, the mechanism of burning certification plays a role in limiting the total amount of vouchers circulating in the market by destroying the vouchers.

Main role of platform token destruction

(1) It is a method to raise the price under the limited use scenarios

Deflation is the bottom logic for encryption assets to keep their prices rising. Whether it is the halving mechanism of mainstream encryption assets or the destruction of platform pass, its fundamental purpose is to ensure the deflation of the platform pass itself. However, compared with the mainstream encryption assets, the use scenario of platform pass is limited – Take BNB, the leading platform pass at present, as an example. BNB mainly conducts chain transactions on the currency security platform, including deducting service fees and rewards. However, the use environment of the platform token itself is very limited. Even though BNB has been implemented in the ecology of more than 180 projects, its use environment is still very limited compared with the mainstream token.

At present, encrypted asset trading platforms have the vision of taking themselves as the core, connecting the upstream and downstream with platform pass, and building an integrated community. However, the establishment and prosperity of the whole community is a very long and arduous process. Although the rapid development of the platform can drive the effective increase of the pass price in the long run, for ordinary investors who control the pass, in the highly risky encrypted asset market, long-term control of the platform pass is an overly risky investment decision. Moreover, compared with the completely decentralized mainstream encrypted assets, the trading platform is facing more severe regulatory, security and other risks. Therefore, in order to stimulate the price rise of the platform token, it has become an inevitable means to directly change the market supply-demand relationship by destroying the token to raise its price from the side of the stability and prosperity of the platform itself.

(2) The destruction of the platform pass does not mean an inevitable price rise, and investors need to carefully assess the risk

The destruction of platform pass changes the market supply and demand, but this rise does not necessarily benefit investors. Taking HT as an example, after the announcement of Huo coin followed okex’s announcement of the destruction of 150million HT, although the HT price rose rapidly on the day of the announcement, with an increase of more than 20% within 24 hours, and the peak price exceeded the $5 level, it then fell back quickly, with an increase of only 2%. After that, it even made up for two consecutive days of decline, almost giving up all the gains brought about by the destruction of the good news.

Many retail investors suffered heavy losses in the pursuit of this wave of good news. In the price above $5 alone, HT’s trading volume exceeded 5million, with a trading volume of more than 200million, almost all of which came from the pursuit of retail investors. Many retail investors who suffered heavy losses in HT’s fall attributed this to HT’s rat position.

In a sense, retail investors complain that HT’s rat warehouse is not groundless. According to alcoin, after HT issued the destruction announcement, a total of 134 large orders were issued, including 2.62 million HT large orders.

The platform side has never completely got rid of the rumors of manipulating the token price in the trading of the platform token, including taking the lead, rat trading or insider trading. As the platform token itself is small and easy to manipulate, retail investors need to carefully evaluate the possible fluctuation of token price under the good news when investing in the platform token.

(3) The value of the platform token is still determined by the value of the platform itself

Some platforms maintained a wait-and-see attitude during the wave of token destruction in February.

For example, Johnny Lyu, the co-founder of the Treasury currency platform, made it clear that he would not follow up this wave of destruction, “The recent follow-up destruction of platform passes is an obvious short-term hype, especially for the destruction of non circulating tokens. The form is far greater than the practical significance. We pay more attention to improving the intrinsic value of tokens. For example, in addition to KCs’s functions of deducting handling fees and obtaining VIP qualifications, it is far more meaningful to expand the application in tourism, lending, games and social networking than planning some destruction events.”

The value of the platform token lies in the integrated construction of the upstream and downstream of the whole industry and the construction of the whole community by the platform itself, which has been a recognized principle in the blockchain community.

From this point of view, the destruction of the token is indeed of positive significance to the head platform with perfect community ecology to boost the token price.

However, for some small platforms, the platform itself has no development potential, so the platform pass cannot find application scenarios, and it is difficult to flow in the secondary market. Under this premise, “destruction” itself becomes a gimmick.

epilogue

From this, we can see that proper and planned destruction of pass is a reflection of benign operation for the platform. Although the destruction of the token is generally good news for token, the platform itself has a great impact on the token price. Therefore, in the face of the “token destruction” news, ordinary investors still need to invest cautiously.

In the long run, the price fluctuation of the platform pass, in the final analysis, still depends on the platform’s own credit, cashing ability, operation ability, anti risk ability, profitability and community construction.

Responsible editor; zl

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