The crypto world is famous for making money, but do you know some people are just involved in Defi for scams and frauds to innocent people? Without learning the fundamentals and insisting on investment may have bad results. This article discusses the event in the DeFi world which is commonly known as burning liquidity.
Why are project owners burning liquidity pools?
The answer is simple, the owners want to prove to the world that he will never withdraw from this pool. This is the basic purpose of burning the pool. However, it is also possible the project owner can run away, but other users, have a guarantee for the availability of liquidity for project tokens.
Radium & liquidity
Whenever a new Solana project is launched, they need to add liquidity to Radium. As a result, the project received LP tokens. When someone wants to withdraw from the pool, he needs to provide the LP to Radium. Thus, burning means destroying the LP tokens, and only the owner is not able to withdraw from the pool.
Burning liquidity => burning the pool => no one withdraws the pool!
If the pool is not burned, aggregator platforms such as Dexscreener will mark them as more risky, and this will destroy the project’s appeal to users. The project burning only impacts the project owner, and he is not able to withdraw from the pool. Other users can normally use this pool for trading, they can trade project tokens and enter and exit the pool without any problems.
How to perform a burning operation?
For burning operations, you are required to use PandaTool’s liquidity management. When you open the management console, you can see the current liquidity of the pool. You have the option to burn different ratios according to your needs. It depends on your requirements to burn 10%, 30%, 50% and 100%. It is also possible you can just destroy the tokens, for this, you have to use the token destruction tool.
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