Understanding Token and Liquidity Pool Burning
- Token Burning: Permanently removes tokens from circulation, reducing total supply.
- LP Burning: Destroys liquidity provider tokens, locking liquidity permanently.
How Liquidity Pool Burning Works
What Are LP Tokens?
- LP tokens represent your share in a liquidity pool (e.g., Raydium/Meteora). They function like deposit receipts - without them, you cannot withdraw your deposited assets.
What Does Burning LP Tokens Mean?
- Destroying LP tokens makes the locked liquidity irreversible. This doesn't remove assets from the pool but prevents any future withdrawals.
Can You Still Trade After Burning Pools?
- 👉 Yes! Burning LP only prevents withdrawals. The pool remains active for swaps, and token prices continue fluctuating based on market activity.
Step-by-Step Burning Process
Connect Your Wallet
- Use Phantom or other Solana-compatible wallets
- Ensure you have sufficient SOL for transaction fees
Select Assets to Burn
- Choose between token burning (reduces supply) or LP burning (locks liquidity)
- Verify asset balances before proceeding
Confirm Destruction
- For complete removal: Check "Close Account" option
- Review transaction details before final confirmation
Key Differences: Token vs LP Burning
| Feature | Token Burning | LP Burning |
|---|---|---|
| Purpose | Supply reduction | Liquidity locking |
| Reversible? | No | No |
| Affects Trading? | May impact price | Only prevents withdrawals |
FAQ Section
Q1: What happens to burned tokens?
They're permanently removed from circulation and sent to unretrievable wallet addresses.
Q2: Can I recover accidentally burned assets?
No - all burning operations are irreversible blockchain transactions.
Q3: Does burning LP tokens affect token price?
Indirectly. Locked liquidity may increase investor confidence, potentially impacting market dynamics.
Q4: How do I verify a successful burn?
Check the transaction hash on Solana explorers like Solscan or Solana FM.
Q5: Are there tax implications for burning?
👉 Consult a crypto tax professional as regulations vary by jurisdiction.
Q6: Which DEXs support LP burning?
Raydium and Meteora LP tokens are currently supported. Other platforms may add this feature later.
Pro Tips
- Always maintain a small SOL reserve for gas fees
- Double-check asset selections before confirming burns
- Consider partial burns for flexible supply management
Remember: Burning mechanisms create permanent changes. Ensure you fully understand the consequences before proceeding with any destruction operations.