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samvox
@samvox
The Impact of Burning Token (A) to Create Token (B) on the Price of Token (A) When token A is burned to create token B, it can have several significant effects on the price of token A. We can use economic formulas to explain these impacts. 1/...n
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samvox
@samvox
Decrease in Supply (Supply) and Increase in Price (Price): One of the basic principles of economics is that when the supply of a good decreases and demand remains constant or increases, the price of that good increases. This principle also applies to digital tokens. 2/n
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samvox
@samvox
Let's assume: Parameter S_0 is the initial supply of token A Parameter S_1 is the new supply of token A after burning Parameter P_0 is the initial price of token A Parameter P_1 is the new price of token A after burning With the supply decreasing from S_0 to S_1, if demand (D) remains constant, the price of token A will increase from P_0 to P_1. The relationship between supply and demand is as follows: P_1 = P_0 * (S_0 / S_1) 3/n
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samvox
@samvox
Increased Demand (Demand) and Its Impact on Price: When people burn token A to get token B, there is an increase in demand for token A. Let's assume that demand increases from D_0 to D_1. This increase in demand can also lead to an increase in the price of token A. General formula for price based on supply and demand: P = D / S When D increases and S decreases, the price P increases significantly. 4/n
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samvox
@samvox
Conclusion: Burning token A reduces its number and increases its price because it becomes rarer. This mechanism encourages people to participate more and motivates them to buy and hold token A. This helps to improve the value of the tokens and strengthen blockchain projects
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