- Shib CoOp conducts a premiere SHIB token burn of 97 million on the Shibarium Layer-2 (L2) network.
- Concerns arise about whether such a burn affects the original Shiba Inu’s token supply on the Ethereum Layer-1 (L1) network.
Understanding the Intricacies of Token Burns on Layered Networks
In the world of blockchain, especially with multiple layered networks, understanding token dynamics is crucial. The Shiba Inu community recently witnessed this first-hand when the Shib CoOp, an emerging Metaverse real estate project, declared a notable 97 million SHIB token burn on Shibarium. This Layer-2 (L2) blockchain platform, which sits atop Ethereum, was designed to accommodate an array of decentralized applications (dapps).
The move seemed to underscore Shibarium‘s potential and the prospect of more SHIB burns in the future.
Shibariumscan, the dedicated blockchain explorer for the Shibarium network, confirmed that the burn event happened precisely at 12:32 (UTC). However, this has prompted questions about its genuine impact on the circulating supply of the SHIB token.
Bridging L1 and L2: The Root of the Debate
The crux of the issue lies in the distinction between L1 and L2 networks. Ethereum, being the primary L1 network, serves as the foundation. On the other hand, Shibarium operates as an L2 platform anchored to Ethereum. Here’s the catch: if Shiba Inu tokens are burnt on Shibarium, it doesn’t necessarily mean an equal number of SHIB tokens are eradicated on Ethereum.
Shibburn, a community-led burn tracker, was quick to clarify this nuance, noting that burning a token like SHIB on an L2 network doesn’t eliminate the original token on the L1 chain. Essentially, what’s burned on the L2 is a representation, not the original token from Ethereum.
This gives rise to a more intricate process known as token bridging. In layman terms, when tokens shift from the L1 to L2 network, the original tokens are placed in a specific contract on the L1 side, while new corresponding tokens are created on L2. Therefore, when an L2 burn occurs, it’s these new tokens that are sent to the burn wallet, not the original Ethereum-based tokens.
The prevailing viewpoint, as highlighted by Shibburn, leans on Ethereum’s framework. Ethereum has designated burn addresses, and for a token to be genuinely considered “burned,” it has to originate from the same contract as these addresses.
To date, neither the core Shiba Inu team nor their marketing lead, Lucie, have voiced their opinions on this matter. Furthermore, queries about the necessity of a bridge to harmonize SHIB burns between L1 and L2 have gone unanswered.
In the midst of these discussions, Shiba Inu’s trading value hovers at $0.00000674, falling just under the descending triangle’s $0.00000715 threshold.
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