Any crypto project burning a big amount of coins early on is a very BIG warning sign!

Any crypto project burning a big amount of coins early on is a very BIG warning sign!

This is usually a sign of a scam or atleast of very shady developers and here is why:

First of there are very legit use cases for burning coins (see eip 1559/ the london upgrade for example) but if they burn tons of coins early on be very carefull.

One reason to do this is to make it less obvious how much of the overall supply is being held by the creators or whales (creators owning most of the coins is a indicator of a rug pull or atleast a very centralised project).

Imagine xcoin is created with a supply of 1000 coins. The creator himself owns 100 of these (or 10%). Shortly after launch they announce that they will burn 500 coins of half of the supply. These coins are burned and there are now 500 xcoins left. The creator still owns 100 of these (or now 20%) but it is much harder to easily tell he holds this much of the coins overall than if he had just created xcoin with a 500 max supply from the beginning.

There are many reasons projects might introduce burning mechanics, but if they do it very shortly after launching the project always ask yourself why the did not just mint less coins to beginn with?

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Be carefull out there the knight is dark and full of rug pullers.