Reducing supply through three mechanisms
Token burns remove tokens from circulation permanently. Fee burn routes a portion of protocol transaction fees to a dead address. Buyback-burn uses treasury revenue or profits to repurchase tokens from the open market, then destroys them. Deflationary supply designs mint fewer tokens or burn existing ones proactively.
Ethereum uses fee burn, routing most transaction fees to a burn address since 2021. This creates genuine deflationary pressure whenever the network is congested.
Burns and true scarcity
Burning tokens only reduces supply; it does not increase demand. A 10% burn is mathematically identical to a 10% reduction in circulating supply, which is exactly that: supply reduction. Naive investors often treat burns as bullish catalysts. The bullishness comes only if the burn rate exceeds new issuance, creating net deflation.