What is a Minting & Burning?
Quick Definition
Minting is the process of creating new tokens; burning is the process of permanently removing tokens from circulation.
Full Definition
Minting and burning are the two fundamental mechanisms that control a token's supply. When new tokens are needed, for example, when a user buys a stablecoin from the issuer, the issuer mints new tokens and delivers them to the user. When tokens are redeemed or otherwise removed from circulation, they are burned, reducing the total supply.
How minting and burning maintain stability
For stablecoins, minting and burning are tightly linked to reserves. New tokens are minted only when the issuer receives equivalent value in fiat currency or reserve assets. Tokens are burned when holders redeem them for the underlying assets. This 1:1 relationship between minting, burning, and reserves is what keeps the supply aligned with the backing and ultimately supports the stablecoin's intended value.
Minting and burning with Steady
Steady mints new STDY tokens when qualified institutional investors acquire them through our primary market, with an equivalent value deposited into reserves. Tokens are burned when those investors redeem them, releasing the corresponding reserve value. This process is handled through Steady's smart contract and is restricted to Steady Protocol, ensuring that the total supply always reflects the assets held in reserves.
Related Terms
Redemption
ReadRedemption is the process of exchanging a stablecoin for its underlying value (typically fiat currency) directly with the issuer.
Reserves
ReadReserves are the total pool of assets held by a stablecoin issuer to back the tokens in circulation.
Supply
ReadSupply refers to the total amount of tokens that have been issued and are in circulation.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
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