New and potentially up-and-coming projects love to try and generate hype with token burns. Why? Well, it's basically to trick the community into thinking number is gonna go up in order to use them as exit liquidity. It becomes a self-fulfilling prophecy where the token burn creates a pump/dump just due to the shift in market sentiment rather than having actually created any real value.
Imagine printing a token out of thin air in a premine and then acting like burning a small fraction of the premine is bullish. This is the ultimate expression of a toxic introverted token burn. That "money" that was created from the inside was never going to extract any real value. These premines are big enough to crash the token to zero a hundred times over. This is the simple nature of liquidity and spot price as they relate to near infinite stacks of counterfeit tokens sitting on the sidelines. It's insulting on multiple levels.
The ultimate problem with crypto is that it's not innovative. How do we know it's not innovative? Because the greedy people marketing it are telling us it's innovative and solves a problem. They don't care about making something amazing; they care about getting rich. This is true at least 90% of the time. Let's be honest it's higher than 90% but I'm being nice and conservative.
Even in the case of the product being actually valid and having a sustainable use-case, there are still a million ways for the thing to fail. The smartest dev can still be terrible with money. Those are completely different skills. You give them $20M to build the thing and they go out the next day and buy a lambo with the money. We see this play out over and over again, not just in crypto but any hype cycle like the Dot Com bubble.
The ultimate problem here is that creating actual demand for a thing is very hard while reducing supply (or faking it) is much easier. To increase demand for something means it has an actual use-case and an actual reason for more users from the outside to join the new community. This is very difficult to achieve, so most of the ideas people come up with revolve around lowering the supply or creating a deflationary system with the expectation that this is how economies operate. And yet thousands of years of economic history tell us that deflation is the worst thing an economy could possibly experience. It's a tricky thing to navigate especially with Bitcoin going up in value exponentially for over a decade. That's how broken the current system is. BTC can move up exponentially even though the way that it works is very far from ideal.
When people pitch ideas to lower supply: they very rarely consider that they are also lowering demand. Emissions exist to incentivize the current infrastructure. If we take incentives away then the infrastructure goes away. Inflation is an investment, and if that investment is a good investment then it more than pays for itself. Just because removing it creates less tokens doesn't imply that the network will gain value. It can just as easily backfire into oblivion and cascade outwardly into a rippling effect of no-confidence from the current userbase. Everything is connected.
Conversely, printing more money will increase the spot value of the token if that investment is sound. This is a simple truth that I don't see anyone in crypto talking about. All I hear is the same repetitive brainwashing that tells us that 21M is the ultimate system and any token with an uncapped supply is doomed to bleed out to zero. That's not how it works but that's where current consensus stands across the board. They are wrong, and they double and triple down on being wrong every time Bitcoin breaks a new all time high. After all: they can afford to be wrong when they get paid to be wrong. It won't last forever.
The best possible outcome for token burns is to get attention from outside the network. Meaning if we want to burn Hive we don't want diehard Hive users to be destroying those tokens. What we actually want is people holding BTC or USDT to notice us within the attention economy, trade their BTC/USDT for Hive on the open market, push up the price, and then burn the Hive so it never gets dumped on the market again. This is the way.
I say these things because the other day I was thinking about the tokenomics for my own system and realize that getting people on Hive to burn their assets is not good. If I leverage my reputation on Hive and get people who trust me to take their Hive and burn it... that means all the people on Hive who trust me the most are going to lose governance power and bandwidth on the main chain. All this would happen without Hive price even going up. That's a terrible terrible outcome. Just sayin.
The only way for number to go up is to get attention from the outside or to build real value from the inside. Both of these avenues are difficult paths to walk down. Nobody said solving problems was easy. If it was someone would have solved it already.
Everything is connected, including extroverted and introverted liquidity. Reducing outflows with introversion will push the price up even if inflows stay exactly the same. It's not the ideal scenario as this isn't real growth, but it would make number go up.
However, what we really need to avoid is thinking that burning tokens that were never going to be dumped is bullish. If tokens were never going to be dumped, burning them does nothing. It's complete vapor. In fact, it's potentially toxic if the users are destroying their own governance power on the main chain and centralizing the distribution. The goal should always be to decentralize distribution, and token burns are very rarely ever going to achieve that in any meaningful way unless they are set up in a very clever way.
