What is burning an NFT?
In the world of non-fungible tokens (NFTs), burning refers to the process of destroying a token or removing it from circulation. There's no such thing as "deleting" in crypto, so that's where the "burn mechanism" comes into play. NFTs, being unique digital assets, can't be duplicated or replaced, which makes the burning process significant in maintaining scarcity, which in turn drives up the value of the remaining NFTs. It is important to note that burned NFTs don't disappear from the blockchain itself, since it is immutable.
How is an NFT burned and why?
The process of burning NFTs depends on the smart contract of the NFT collection. If the smart contract includes an option to burn an NFT, a burn function can be called to do so.
However, if burning wasn't planned in the smart contract, burning NFTs is done by transferring them to a "burn address" (also known as a null address).
A burn address is a special address on the blockchain, that has a string of zeros as its public key. On the Ethereum blockchain, you'll find a "0x000000000000000000000000000000000000dEaD" null address. Once the tokens are transferred there, they become impossible to access.
Even though Ethereum is the most popular blockchain for NFTs, burning is possible on other blockchains such as Solana, Stacks and many others. As the act of burning an NFT is a transaction in itself, it involves paying a transaction fee (also called gas fee).
Burning can be done to eliminate unsold or problematic inventory from an NFT drop, or to engage collectors through "upgrades". As an example, a trend has emerged recently, where certain NFT projects use burning as a marketing tool, encouraging their collectors to burn their NFTs in exchange for an airdrop. A person may also want to burn NFTs to declutter their wallet, especially with NFT scams going on where people send unsolicited NFTs to users.
To keep track of burned NFTs, Etherscan, the Ethereum blockchain explorer, provides information on NFT burn projects, including the number of NFTs burned and the corresponding metadata. Popular NFT marketplaces, such as OpenSea, also display information on burned NFTs, including the total supply of NFTs and the floor price, which is crucial information for collectors and investors.
Burned NFT projects examples
The Explorer Guild, one of the top Stacks NFT projects, is a good example of the value that can be brought by burning. The NFT collection was created by Stacks' decentralized blogging platform, Sigle, which was the first startup to use NFTs as a means of fundraising, with NFT holders enjoying extra utility on the site. The collection was originally composed of 10000 assets. However, after an on-chain vote by the community, the decision was made to burn 7000 of them in order to increase value and scarcity. Something novel emerged from burning those NFTs: the startup thought it would be a shame for them to simply disappear from circulation and fall into oblivion, and instead created the Explorer Guild Museum, an interactive experience that allows users to view and inspect the burned NFTs, while wondering through the metaverse, or Sigleverse. The exhibition is composed of 100 NFTs from the 7000 burned, decided by a verifiable random function produced by the Stacks blockchain, and is renewed every block (approximately every 10 minutes). When a new block is created, this combination of 100 Explorers disappears to make room for a new one. Through burning, increased value was brought to the remaining NFTs, as well as to the burned ones, that became a new experience entirely.
Artist Damien Hirst has also joined the burning trend at his Newport Street Gallery in London. The collection "The Currency" is made of ten thousand handmade artworks, and the artist told his buyers to choose either the physical artwork or the NFT representing the piece. If the buyer chose to keep the NFT, the corresponding physical version of the NFT would be destroyed - burned, as it were. The act of setting physical NFTs on fire added a whole new dimension to the world of NFTs, where the scarcity and value of digital assets are not only limited to the digital world but also extend to the physical realm.
Burning in cryptocurrency
The concept of burning a token isn't limited to NFTs, and can be applied to cryptocurrency as well. With Proof of Burn, which is a quite novel consensus mechanism, miners compete by destroying ('burning') a proof-of-work cryptocurrency as a proxy for computing resources. PoX is an extension of Proof-of-Burn, which was the mining mechanism originally proposed for the Stacks blockchain (founded by Muneeb Ali and formerly known as Blockstack), however, unlike with PoB, the anchor crypto is distributed instead of burned.