- The current trend by investors is aimed at the Shibarium Layer-2 solution for Shiba Inu through its burn portal, where the supply of SHIB is expected to be reduced to the market.
- The burning mechanism adopted by SHIB is similar to Ethereum’s EIP-1559, whereby a certain percentage of the transaction fees is destroyed to gradually reduce the supply of coins in circulation.
- Looking at the model where 70% of base fees are burned, and 30% go to the Shibarium treasury, this strategy also seeks to balance the scarcity and growth aspects.
The Shiba Inu team has made efforts to decrease the circulating supply of SHIB tokens with the launch of the burn portal for the Shibarium Layer-2. This has raised the interest of investors and analysts due to its likely influence on the supply and demand of the token. Token burning is not a new concept in the crypto market, and it has been implemented by other cryptocurrency projects. Effectively, when supply is decreased through burning the token might experience a rise in value as it becomes scarce.
The burn mechanism used in Shibarium is similar to the Ethereum Improvement Proposal EIP-1559 that occurred during the London upgrade in 2021. This upgrade adopts what is known as the “base fee”, a fee that is mandatory and gets burned, effectively eliminating some of the tokens from circulation.
Shibarium has also adopted this feature into the burning portal, meaning that, every time someone transacts within the network, a base fee gets locked up in the burning contract. The burn process can be initiated once enough BONE tokens have been assembled, and the ShibTorch feature has been released.
Investor Responses and the Impact on the Market
Users can initiate the burning process only if they have at least 100 BONE tokens. Once linked with the wallet, users can see the exact amount of SHIB that will be burnt and the transaction’s hash. As for the distribution of fees, it is crucial to know that only 70% of the base fees will be burnt, while the remaining 30% will fund the Shibarium treasury.
Similarly, this structure aims to ensure that supply is controlled adequately, allowing for ecosystem growth.This burn portal is considered by many as a bullish signal for SHIB since it can, over time, decline SHIB supply without causing any abrupt move.
While the Shiba Inu community continues to accept this new tool, the crypto world will be interested in whether this burn portal will be the stimulus required for SHIB to gain more popularity.
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