Welcome (back). This post is a continuation of my previous entry titled What March 31st means for Tron [TRX] Pt. 1 - Exodus Test Net Launch in which I broke down the fundamental significance of Tron entering the "Exodus" phase of their road map on March 31st which I predict will drastically increase the utility and thus value of the coin.
Another significant event that's gained a lot of hype in cryptospace is the ever-so-controversial coin burn. In this post I aim to clear up some Fear, Uncertainty, and Doubt and explain what the two types of coin burns are and how it relates TRX's value.
Enough FUDding around. WTF is a Coin Burn?
A coin burn is the process of sending a number of coins to a wallet address from which they cannot be spent or released back into the ecosystem of that coin, decreasing the supply and increasing the value of each individual coin.
The address of the wallet from which the coins are being sent is typically made public so that everyone who owns the coin can verify the transaction on the blockchain.
The wallet to which the coins are being sent does not have a private key, so therefore the coins are burned and can't ever be recovered....ever.
This is an example of how deflationary monetary policy works as opposed to fiat monetary systems like the U.S Dollar which are inflationary in nature.
The National Treasury prints and distributes dollars, and the Federal Reserve controls the interest rates. Since the National Treasury acts as the centralized force behind the US dollar, they're able to pump more $ into the economy as they please, decreasing the value of the currency that everyone holds onto. This is an example of inflationary monetary policy.
But I digress...
So How will Tron's Coin burn on Saturday March 31st affect its price?
Remember that Tron's price (and most cryptocurrency's) fluctuate according to sentiment and general consensus of those who hold the coin. The media, hype, FOMO, along with the actual launch of Tron's Exodus Test Net - which will provide a real utility for the coin - are the factors that will drastically increase the price of the coin, not the burn itself.
There are two types of coin burns. Below is a Reddit commenter that did a great job in descirbing the difference. Instead of re-inventing the wheel, I've provided a snapshot of the explanation below.
Tron's Coinburn will be the latter, a transactional burn in which a percentage of the coins involved in the transaction are burnt, sent to the eternal wallet of no return.
This will of course affect the valuation of Tron overtime, but not immediately.
As Reddit user cmd105 states, the transactional burn that will initiate on Saturday March 31st is similar to what Ripple introduced as a deflationary mechanism on it's blockchain in early 2017. Remember that Justin Sun served as Ripple Labs' Chief Representative in Greater China, Special Representative and Advisor since 2014. I'd assume that he's basing this model on his experience with XRP.
In conclusion, if you're focused on how high, and how soon Tron's price will spike, it's best to analyze the sentiment surrounding it on social media such as Twitter and Reddit. Unfortunately Tron has been - and continues to be - the victim of malicious FUD attempts by humans and bots alike.
Good news is, if you've read this far, than I'm sure that you're an informed and intelligent holder of the coin. Considering the exponential growth of Tron's price over the previous months, I feel quite comfortable with my own position on the coin with impending partnerships, development, and even a new European office, assumably in Malta.
That's all for now. Stay tuned for new thoughts, insights, and poorly drawn doodles of basic cryptography principles.
Hodl strong and see you on Blockchain Island.