Read the Token Destruction and FIL Destruction Mechanism in One Article
Recently, the effective computing power of the entire network of Filecoin has broken through 2EiB (the network baseline of 2.5EiB is just around the corner), which has attracted the attention of the entire network. However, careful miners have noticed that while the effective computing power of the entire network is growing rapidly, the amount of FIL burned is also increasing. As of 16:30 on February 3, the amount of FIL burned has reached 14,905,820 FIL, accounting for the total amount of FIL 0.745%, accounting for 18.86% of the circulating supply.
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What is Token Burn
Token destruction refers to the permanent removal of tokens from market circulation, which means that the destroyed tokens are equivalent to permanent freezing. The common token destruction method is to put the tokens to be destroyed into the black hole address, the most famous ones are the black hole addresses of BTC and ETH:
BTC black hole address: 1BitcoinEaterAddressDontSendf59kuE
ETH's black hole address: 0x0000000000000000000000000000000000000
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Why Token Burn
The reasons for token destruction can be summarized into the following three points:
➊ Some projects adopt the PoB (Proof of Burn) burning proof mechanism to prove the user's investment in the network by destroying tokens, so as to obtain the right to "mining" and verify transactions.
➋ Reduce circulation, thereby increasing token value. For example, some methods of destroying tokens reduce the circulation in the market, thereby adding value to the tokens. For example, Binance and Huobi will regularly destroy some platform tokens.
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FIL destruction mechanism
In Chapter 6 6.2 of "Creating the Filecoin Economy", the "total amount of tokens burned" is described. The description can be briefly summarized as the following two points:
➊ During the mining process of miners, due to subjective or objective reasons, storage failures and consensus failures (such as power outages of mining machines, interruption of data encapsulation, sector failures, early termination of transactions, etc.), if If the failure cannot be repaired in time, the miners will be punished. These punished FILs do not belong to the system and do not enter the official pocket, but directly enter the black hole.
➋ According to the EIP1559 protocol, Filecoin's message uplink fee is directly destroyed. The message on-chain fee is paid by the miners to pack the message and directly burn the fee. The fee directly burned according to the agreement mainly includes the network transaction fee for the calculation and bandwidth on the payment chain.
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Future value of FIL
Through the Filecoin economic model, we know that the total amount of FIL is 2 billion. Even with the rapid growth of the effective computing power of the entire network, the output of FIL is increasing day by day, but based on the punitive destruction mechanism, the circulation of FIL will gradually decrease. . In addition, under the joint action of the halving and destruction mechanism every 6 years, the total circulation of FIL has instead formed deflation, and the continuous deflation effect will also directly stimulate the price of FIL currency. It is estimated that the price of FIL will rise in the future.
On the other hand, with the continuous expansion and activity of the IPFS/Filecoin ecosystem, the demand for FIL will increase. One day in the future, FIL will be fully released, and the entire network will no longer produce FIL at that time, but with the prosperity of the Filecoin ecosystem, its commercial value will continue to increase. Based on the destruction mechanism, the circulation of FIL will inevitably continue to decrease, but as the commercial value of Filecoin continues to increase, its ecological demand for FIL is also increasing (for example: ecological applications increase; network search services increase), which means that FIL The appreciation space of FIL is getting bigger and bigger, and the increase of FIL value will also affect the price of FIL currency. It is estimated that the price of FIL will gradually rise.
Overall, the destruction mechanism of FIL is very necessary. The deflation model based on the destruction mechanism not only ensures the positive cycle of the Filecoin network economy, but also realizes the healthy development of the Filecoin network ecology.
