Which really works better: token burns or buybacks?

In the cryptocurrency world, you often hear the terms “burn” and “buyback.” Many people wonder what they actually mean. Broadly speaking, both are strategies aimed at reducing supply to increase token value.

Burn: Saying Goodbye Forever

When tokens are sent to a zero address (a wallet that no one can access), those tokens are effectively destroyed—they disappear completely and can never be recovered. During the 2017–2018 crypto bubble, projects like Bitcoin Cash (BCH), Binance Coin (BNB), and Stellar (XLM) frequently used this method.

New projects often start with a huge supply, like 1 trillion tokens, with a price of just a few cents. By burning billions of tokens, they create scarcity, which can drive the price up.

Key Point: Once burned, tokens are gone forever. Developers claiming “we burned tokens” might not always be truthful—they could be hiding tokens in a wallet instead of truly destroying them.

Buyback: Buying and Holding

This approach is different. Developers buy tokens from the market and keep them in their own wallets. They don’t destroy these tokens; instead, they hold onto them, reducing circulating supply without removing them from existence. Binance, for example, has systematized this by using 20% of quarterly profits to buy back BNB tokens. In October 2021, during the 17th buyback, over 1.33 million tokens were removed from circulation.

The advantage of buybacks is certainty. Since they are programmed via smart contracts, they execute automatically, not based on developers’ whims.

Which Works Better? Does Reducing Supply Always Raise Price?

In theory, yes. But in practice, it’s more complicated.

Reasons supply reduction can be effective:

• Scarcity increases
• Long-term price stability
• Investors are more likely to hold

Reasons it might not work as well:

• Burning doesn’t guarantee price increases
• Deflationary currencies can suppress spending, shrinking the ecosystem
• If burn rate outpaces growth, liquidity can dry up
• Sometimes it’s just a psychological effect rather than a real value boost

Sometimes Used to Deceive

Developers might claim “we burned tokens,” but in reality, they just transferred tokens to their own wallets or use it to hide large whales (big holders). Transparency is crucial here.

Is Buyback Becoming the Main Strategy?

Large projects like Nexo and Binance focus more on buybacks because of controllability. They can always reintroduce tokens into the market or adjust their holdings as needed. This flexibility is more practical than permanently burning tokens.

It’s similar to how traditional companies buy back their own stock to stabilize the market and boost shareholder value.

However, regardless of the approach, it’s vital for the community to scrutinize the project’s true intentions. Is it just a pump scheme? Does it offer long-term value? Transparency and genuine value propositions are key.