Toncoin is The Open Network (TON) ecosystem’s native cryptocurrency, designed with an initial supply of 5 billion. The TON Community proposes implementing a deflationary mechanism to burn 50% of all transaction fees, including transaction and storage fees, decreasing the circulating supply.

This initiative is an essential step for the future development of the ecosystem, which unites the interests of users and validators.

TON validators receive staking rewards from two sources – transaction fees paid by users and new coins issued for each processed block. With further growth of the network adoption, fewer coins will enter circulation, and validators will still keep 50% of transaction fees for themselves. The deflationary mechanism will only affect the transaction and storage fees while the amount of newly issued coins remains unchanged.

Some TON projects previously experimented with a so-called “black hole” mechanism, sending Toncoins to a specific wallet with a burn function. Coins in this address were rendered unusable and cannot be transferred or accessed. However, this process was manual and voluntary.

What is a coin burn?

A token or coin burn refers to the process in which a cryptocurrency project eliminates a portion of its tokens and decreases the available supply. These tokens are transferred to an inactive wallet with an undisclosed private key, rendering them permanently unspendable. Token burns are commonly executed periodically, such as quarterly or semi-annually, but there are also real-time or auto-burns. In the case of a real-time burn, a specific amount of assets gets burned with every transaction or block. The TON Community proposes a real-time burn deflationary mechanism that will destroy a fixed portion of all fees paid by users for transactions in each block. This will decrease total and circulating supply, providing a sustainable and safe long-term growth plan for TON’s ecosystem. The proposed burn ratio is 50% of all transaction fees paid by users.

How much TON will the real-time deflationary mechanism burn?

We estimate the immediate burn amount will be around 350-400 TON daily, 50% of daily fees of 700-800 TON. As the TON ecosystem grows and the number of daily transactions increases, the burned amount will grow, eventually leading to a visible decrease in the total supply.

How will the real-time burn affect me as a TON holder and user?

The real-time burn will not directly impact your holdings, and there’s no action required from your side. The long-time effects of a decreased supply should favor TON holders, but this heavily depends on Toncoin’s use cases and market demand.

When will the real-time burn start?

As TON is a decentralized ecosystem, the TON Community, or any single entity, cannot implement any proposals without the consensus of the majority of TON validators. The TON Community has already proposed the implementation to TON validators, and the discussions are ongoing.

The deflationary mechanism will be automatically applied once validators vote for the proposal.

How will be the real-time burn executed from the technical perspective?

All the commissions in the shard’s block are summed up in the block's header. When the block is getting registered in masterchain by masterchain validator, the commissions are added to the message which is sent to the Elector [contract]. After the launch of the deflation mechanism, the Elector will send only half of the transaction fees to the validators. Elector will send the remaining 50% to a black hole address, removing the coins from circulation. The TON Community proposed a burn ratio of 50% of the validators’ commission.

If you are interested in the exact details of the proposed implementation, you are welcome to consult the whitepaper or dive directly into the implementation’s source code.