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It’s tricky doing an accurate EOS price prediction based on whether some 25 million EOS coins (worth $58 million) are burned in March. Already this month, two coin burns— in which tokens are destroyed to create artificial scarcity, and thus drive up price—have dominated the crypto landscape: Tron kicked it off, by destroying 182 million TRX ($3.4 million), then Binance removed 1.6 million BNB ($9.4 million) from its ecosystem.
But, while some EOS holders are laying the foundations for an even bigger crypto bonfire, it’s unclear whether the move would drive up the price of the coin. Here’s why.
How the EOS proposal to burn coins originated
The idea to burn the coins came up in connection with one account on the EOS network, called eosio.saving. The EOS network, which has a 5-percent inflation rate, splits new tokens between the miners, who get 1 percent, and the eosio.saving account, which receives the remaining 4 percent. In theory, this money is earmarked to fund EOS-based initiatives—but so far, none has been implemented. So, this account is just slowly building up a store of coins, with no clear purpose.
On January 11, EOS holder “investingwad” staked 2.7 million EOS to immediately launch a referendum that would do something about the growing eosio.saving reserve. The proposal describes the 5 percent inflation rate as “very high,” and recommends the coin burn as the best solution.
That would seem like a good way to drive up the price of EOS coins. Coin burns reduce the total supply of coins, which in theory puts upward pressure on the price, since there are fewer coins available.
Indeed, Binance regularly buys up coins and burns them, for just that reason. However, there might be big difference between that—taking coins already in circulation, being traded among buyers and sellers—and burning the savings reserve, which isn’t being used by anyone. So even if the vote passes, it remains to be seen whether torching the reserve has the desired effect of the price of EOS coins.
Voters want to burn EOS, but turnout is low
Predicting the price of EOS vis a vis a coin burn is further complicated by how voting works in the EOS community. A vote is an ongoing affair and requires a minimum turnout of EOS holders—it’s not a simple majority-rules kind of election.
The EOS network is run by EOS holders. Holders can stake their coins to vote on proposals that can change how the network operates. A plucky bunch of EOS stakeholders is turning out to vote for a burn of 25 million EOS coins, which theoretically could reduce the inflation rate from 4 percent to just 1 percent. Some 98% of the voters who have turned out so far back the plan.
The only question is whether the required minimum ( holders of 15% of EOS total supply) will ultimately turn out to vote.
So far, voters strongly favor burning the EOS coins to bump the EOS price.
With 1056 votes cast to date, some 14.8 million EOS has been staked in support of burning the EOS coins, and only 900,000 EOS against. This is just one and a half percent of the total supply of coins, only a tenth of the required number of staked coins.
Despite the overwhelming support among the voters who have turned out, too many EOS holders have yet to vote. And whether they do at all is in doubt. This is a community where voter apathy prevails. The majority of EOS referendums have zero percent voting turnout, with the highest vote on record below two percent. Redditors have already picked up on this with one poster asking why turnout is so low only to be met with responses like “Nobody. Is interested. In. Voting.” and anarcoin (presumably a crypto anarchist?) suggesting the voting system should be disbanded—how fitting.
But this isn’t exactly unusual. Unfortunately, it mirrors a real world trend with election votes having a reputation for low turnout. And look what happens. Even with a reasonably low barrier to entry of 15 percent, it seems like people are simply not willing to stake their coins and have their say on crucial tokenomic decisions. Perhaps instead of this referendum, it’s the voting system that should be burned.