Welcome to another Crypto Jargon post – the series where we break down the complex crypto terminology. Today’s article features the following terms:
- Token Swap
- Token Burn
- Eater Address
- Vanity Address
First, a reminder about the difference between tokens and coins.
Coins are those cryptocurrencies that are using their own blockchain and are most commonly used as units of exchange, digital money of all sorts.
Tokens are cryptocurrencies that are built on top of another platform, in the form of smart contracts, they don’t use their own blockchain but utilize the blockchain of the platform they’re built on, like Golem (GNT), Basic Attention (BAT) or OmiseGO (OMG) which are built on the Ethereum platform and use Ethereum addresses and its blockchain. There are many more of course and Ethereum is not the only platform that hosts smart contracts and tokens but it’s the largest one, so it’s a good example.
In some cases, projects that based their tokens on the existing blockchain decide to migrate to their own mainnet blockchain in order to have more options and control over their currency, which happened with TRON and EOS in 2018. In such instances the tokens are being swapped, meaning that the token holders are receiving the correct amount of tokens from the new blockchain as they had before the migration. In some cases the token swap is on 1:1 ratio, meaning you receive the same amount of tokens. In other cases, the ratio can be higher or lower, depending on what the developers of that project decide. If they choose to create scarcity, they may issue less tokens on the native blockhain and exchange the old tokens on 1:10 or 10:1 ratio or whatever they deem fair. There’s no fixed rule about this but it’s always explained prior to the event and users have the choice to hold or sell their tokens in advance.
After such migration, the token becomes separated and can be used as a payment unit for certain purposes. It is no longer a token but it can be considered a coin and the old version, the token is not compatible with the new blockchain, hence why it is important to watch out for token swaps which are usually announced quite in advance, to avoid investors losing money.
Token Burn as a term, is referred to the destruction of a certain number of tokens in order to reduce their number in circulation (create scarcity). On the whole, a token burn is a deflationary measure helping to increase the token value and retain the confidence of the token holders.
First of all, this strategy allows reducing the total supply and thus increasing the market value of tokens. Usually, when a company burns or locks a number of tokens it causes the price to increase due to the law of supply and demand. Even the news about upcoming token burn can significantly drive up the exchange rate. Also, this is the way of maintaining stability and minimizing the possibility of fall in exchange.
Examples of token burns are Binance Coin (BNB) and Kucoin Shares (KCS) both of which have regular token burning which is public and publicized in order to maintain transparency. The public record of this process is known as Proof Of Burn and is covered in another episode of Crypto Jargon.
And here comes the next term – Eater Address. This is used in proof-of-burn algorithms to store coins that can never be spent. Eater addresses are valid Bitcoin addresses that were generated randomly and not from a specific private key. Since you can’t backward-calculate a private key from a Bitcoin address, these eater addresses are basically unspendable.
Here’s an example of an Eater Address with over 13 bitcoins that are forever locked (or stuck) in it.
Please don’t send any btc to that address, it will never be spent.
Lastly, there’s also something called Vanity Address.
Sounds fancy, right?
It’s actually a Bitcoin wallet address that contains a number of letters that you can choose yourself. There are websites that give you the option to add letters of your choice to an address to make it more appealing, which is an act of vanity, hence the name. One such website is bitcoinvanitygen which allows you to add a few letters for free or more for a small fee of your choice. Like this one here, where I selected “YourName” followed by the rest of the auto-generated alphanumeric characters. The address also has to begin with a digit or else it will not be associated with the Bitcoin blockchain.
These and many more terms are explained in my eBook “Crypto Jargon A-Z: definitions of crypto terminology” which is the most up-to-date publication of its kind. With over 700 terms, acronyms and trading slang, it contains everything related to cryptocurrencies and blockchain tech: a must-have guide for every crypto investor. It’s an Amazon bestseller and it’s available for Kindle here.
Go to http://www.ojjordan.com/cryptocorner and grab your digital copy today.
Where I buy crypto:
►Changelly (good for instant coins swaps)(Global)
►Payeer (Europe, Asia, alternative to paypal)
►Coinbase (USA, EU, Africa) Get $10 worth of Bitcoin on your first $100 crypto purchase with this link: http://bit.do/coinbase_join
Where I store my crypto:
- Ledger Nano – the best hardware wallet (offline storage)
- Trezor – also one of the best wallets out there.
- Exodus – desktop wallet
- Coinomi – mobile phone wallet with instant coin swap feature
- Crypto.com – mobile wallet and exchange
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