Shiba Inu's Burn Portal Rewards Are Not That Hot

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  • Shiba Inu programmers have begun to pay "rewards" for SHIB holders who intentionally destroy or "burn" portions of their invested tokens to reduce the supply of SHIB.
  • Since launching the SHIB burn portal in April, more than 29 billion SHIB have been burned.
  • The circulating supply of SHIB is more than 549 trillion, according to CoinMarketCap, which means only 0.000052% of that supply has been burned so far.
  • The "rewards" for burning SHIB are given in other tokens that are much less valuable than SHIB and have a maximum supply of 978 trillion tokens, according to CoinMarketCap.

More than 29 billion Shiba Inu have been removed from circulation since the token's burn portal last month, but an incentive to destroy more SHIB is puzzling.

It's being reported that Shiba Inu developers have begun to incentivize holders of the SHIB token -- which they purchased with fiat currencies of some kind -- to voluntarily destroy or "burn" portions of those investments to reduce the circulating supply and theoretically increase the value of each remaining token.

The idea would be similar to having people who own Rembrandt paintings agreeing to collectively destroy the works of art to shrink the supply to pump the value of those paintings that continue to exist. Obviously, it's not a perfect analogy because a single SHIB token is priced at just $0.00001222 per token per CoinMarketCap, but you get the idea.

Since the official burn portal was launched on April 23, 2022 Shiba Inu investors have willingly thrown away more than 29 billion SHIB tokens worth more than $279,000. Now that may seem like a lot, but the current circulating of Shiba Inu is more than 549 trillion according to CoinMarketCap, which means only 0.000052% of that supply has been burned so far. The price, meanwhile, has been cut in half since the burn portal launched -- meaning the price is going in the wrong direction!

We know that there are broader macroeconomic factors hurting all crypto such as increasing inflation and interest rates as well as the Terra (LUNA) and TerraUSD (UST) contagion, but the SHIB burn action has done nothing to help the price per token. Shiba Inu supporters will say it needs more time and more destruction of tokens to work. I completely agree, but who's going to step up and willingly destroy their investment?

To burn just 10% of SHIB tokens will cost hundreds of millions

Doing some quick math, to burn just 10% of the circulating supply of SHIB tokens -- which would mean that 54 trillion tokens would have to be destroyed -- at the current price of $0.00001222 per token would cost investors $659.8 million in aggregate. That's real money that a lot of investors would have to be willing to lose, and there would still be more than 500 trillion SHIB circulating.

A new "rewards" token is a puzzling solution

To try and help incent Shiba Inu users to burn more SHIB the developers are offering 1:1 "rewards" tokens called Ryoshis Vision (RYOSHI) that are staked on the ShibaSwap decentralized exchange. The RYOSHIs promise a passive 9.6% annual return. While that sounds like a fair exchange -- being paid in RYOSHIs for destroying SHIB -- it might not be.

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At time of writing, a RYOSHI is priced at $0.0000000418 per token, so one RYOSHI is significantly less valuable than a SHIB token priced at $0.00001222. And RYOSHIs have a maximum supply of more than 900 trillion tokens. Bottom line, this burn portal rewards calculus seems more like a shell game than a sustainable valuation model.

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