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ShibTorch: burn tokens on Shibarium

Cryptocurrencies can be "burned" through a process where tokens are intentionally removed from circulation, typically by sending them to a public address that can only receive tokens but cannot spend them. This address is often referred to as a "burn address".

In fact, the use of burn addresses is the most common method to eliminate tokens from circulation. This address is designed to be unspendable, meaning the tokens sent to it are effectively taken out of circulation permanently.

Why cryptocurrencies are burned​

There are a few reasons why burning crypto is important:

  • Inflation Control: For cryptocurrencies with inflationary supply models (where new tokens are continuously created), burning can act as a deflationary mechanism to balance or reduce the inflation rate.

  • Reducing Supply: By reducing the total supply of tokens, the remaining tokens can potentially increase in value due to the principles of supply and demand. This can be beneficial for holders of the cryptocurrency.

  • Incentivizing Holding: Burning tokens can incentivize holders to keep their tokens rather than sell them, with the expectation that the token's value will increase over time.

EIP-1559: base and priority fees​

EIP-1559, which stands for Ethereum Improvement Proposal 1559, is a significant upgrade to the Ethereum network's fee mechanism. It was implemented as part of the London hard fork on August 5, 2021. The primary goals of EIP-1559 are to improve the user experience with transaction fees, make the fee market more predictable, and reduce the volatility of gas fees.

EIP-1559 introduced a new concept called the base fee, which is the minimum amount of gas that must be paid for a transaction to be included in a block.

The base fee is automatically adjusted by the protocol based on network congestion. When the network is busy, the base fee increases, and when it is less congested, the base fee decreases. This makes the fee system more predictable and helps users estimate the cost of their transactions more accurately.

By making transaction fees more predictable, EIP-1559 helps users avoid overpaying for transactions and reduces the frustration associated with fee estimation.

The base fee is burned, effectively removing a portion of the transaction fees from circulation. This introduces a deflationary aspect to Ethereum, as a portion of ETH is permanently destroyed. The burning of the base fee aims to reduce the total supply of ETH over time, which could potentially increase its value.

In addition to the base fee, users can include an optional priority fee, also known as a tip, to incentivize miners to prioritize their transactions. The priority fee is paid directly to the miners and can help expedite the inclusion of a transaction in a block during times of high network demand.

ShibTorch Burn process​

Shibarium's Burn Hardfork implements the EIP-1559 features and enables our own burning mechanism: ShibTorch. It works as an interactive dashboard where the Shiba Inu community can actively participate in and monitor the process of burning SHIB tokens.

Each time a user pays for any Shibarium L2 transaction, the base fee is locked in the burn contract on Shibarium, while the priority fee is directed to the validator. As BONE accumulates from transactions in the burn contract, any user can initiate the burn process from Shibarium.

The burn process begins on Shibarium and is finalized on Ethereum. When a predetermined amount of BONE is accumulated (the threshold can vary and is set by admins), users can initiate the burn process using ShibTorch. The accumulated BONE is then transferred to Ethereum's L1, where it is exchanged for SHIB tokens. These SHIB tokens are subsequently burned, and thus permanently removed from circulation, leading to a reduction in the total supply of SHIB.

ShibTorch is an example of a Shiba Inu’s continued commitment to delivering decentralized solutions and puts community first by allowing anyone to initiate burns once the required amount of BONE is accumulated. This decentralized approach ensures scalability without bottlenecks.

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You can check the full ShibBurn smart contract on either Shibariumscan or Etherscan.

Tutorial: how to burn tokens on Shibarium​

  1. Head to ShibTorch website and connect your wallet. The amount of accumulated BONE from base fees will be displayed in Step 1. As we stated before, BONE tokens will be converted into SHIB, that's why step 1 shows the correspondent value of SHIB based on the BONE accumulated in the contract. You can then click on Initiate Burn.
  1. You will be prompted again with your wallet and you should confirm the transaction. The Step 2 section will now show the amount of SHIB to be burned, the block where this process will happen and the transaction hash. You will need to wait until the next checkpoint happens and then click on Continue Burn to proceed. Again follow the instructions on your wallet.
  1. Finalize this process by clicking on Complete Burn. This is where the conversion from BONE to SHIB happens. Remember that this amount actually corresponds to 70% of the tokens from base fees. As we explained before, we collect 30% of the total to deposit in the treasury.
  1. Finally, you can see all completed burns at the end of the page.