- Shib ecosystem official LUCIE breaks down the impact of Shibarium on the ecosystem and some benefits of the “burning mechanism.”
- She explained that 70 percent of the base fee would be burnt while 30 percent goes into network maintenance.
The burning mechanism of Shibarium is something that excites the crypto community as its potential removal of Shib tokens from circulation sets the price up for a bull run. In January, it was confirmed that Shibarium would have an in-built burn portal to remove tokens out of circulation. This means transactions initiated on Shibarium would burn the asset.
While on our last post, we wanted to remind everyone that BONE serves as the required gas token for operability within Shibarium, we also would now like to formally announce that each #Shibarium transaction will burn SHIB.
The burn rate has, however, not been stable as it fluctuates from experiencing a significant increase to a huge decline. In a latest tweet, Shiba ecosystem official LUCIE has provided a comprehensive explanation of how Shibarium impacts the ecosystem through the burn mechanism that reduces supply.
According to her, whenever transactions are made on the network, the base fee is locked on a Shibarium contract. However, priorities are always given to paid validators. Lucie explained that 70 percent of the base fee is subjected to “burn” while the remaining 30 percent is used to maintain the network.
$SHIB BURNS X #Shibarium, #Shibarium significantly impacts the Shib ecosystem by introducing a burning mechanism that reduces the supply of $SHIB . When users make transactions on the network, the base fee is locked on a Shibarium contract, while the priority fee is paid to… pic.twitter.com/uhqvwDWgdW
— 𝐋𝐔𝐂𝐈𝐄 | ✨Shib.io✨ (@LucieSHIB) June 30, 2023
Lucie’s Explanation of the Shib Ecosystem and the Burning Mechanism
Lucie further examined how Bone tokens are swapped for SHIB tokens in this process:
Accumulated $BONE tokens in the burn contract trigger the burn process on Ethereum’s L1 network. BONE tokens are swapped for SHIB tokens, which are then burned, effectively reducing the total supply. Users can initiate burns through Shibarium’s website, confirming transactions to migrate to the Layer 1 network. Once the process is complete, SHIB tokens are permanently removed from circulation, impacting the total max supply.
In response to the community members who frequently inquire about the benefits of the burning mechanism, Lucie gave more than two merits in her post.
Firstly, she stated that the program introduces a deflationary mechanism to the Shiba Inu token. This is very important to its long-term price and scarcity as it reduces supply over time. In addition, it ensures that the balance between supply and demand in the ecosystem is maintained.
Another benefit is that it incentivizes users’ engagement. When Bone tokens are accumulated and the burn mechanism is triggered, users can participate in the supply reduction process. According to Lucie, all they have to do is to click “initiate burn, ” and then confirm the transaction.
To conclude her post, she explained the difference between the base fee and the priority fee.
The base fee is the minimum amount required for a valid transaction and is burned, reducing the supply of SHIB tokens. On the other hand, the priority fee is paid to validators for including transactions in blocks, incentivizing them to prioritize higher fee transactions.
In March 2022, Queenie, the SHIB Discord moderator roughly estimated that about 111 trillion SHIB tokens could be burnt every year if things go according to plan. She also estimated that a 1 percent transaction fee on Shibarium and ShibaSwap 2.0 could burn trillions of tokens every year.
Lucie’s post got some attention from the SHIB community with one user predicting that with luck, the program could cause about 20 trillion Shib tokens to be burnt every month. At worst, he settled for a 5 trillion token burn monthly.
When this happens, the SHIB price could “kill” more zeros to hit $0.0001. At press time, the asset had recorded a bullish market sentiment to trade at $0.000008.