> For the complete documentation index, see [llms.txt](https://trendarena.gitbook.io/trend-arena/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://trendarena.gitbook.io/trend-arena/overview/mechanics-more-detailed/burning-mechanics.md).

# Burning Mechanics

The burning mechanism represents a crucial component of the system:

* Trading and coin creation remain possible even when burning is disabled or temporarily unavailable
* Burning essentially functions as an oracle that updates the burning rate on the blockchain

The current implementation works as follows:

* We query X's count API every 3 minutes for each phrase
* We collect mention counts with minute-by-minute granularity
* These minute counts are aggregated into 30-minute intervals aligned with even half-hours (00, 30 minutes of each hour)
* For every phrase, we track the last complete 30-minute mention count, which determines the burning rate

We establish three thresholds defining three temperature zones:

| Zone       | % of coins in liquidity pool burned per hour |
| ---------- | -------------------------------------------- |
| 🔥 Extreme | 1                                            |
| ☀️ Hot     | 0.1                                          |
| ❄️ Cold    | 0                                            |

These thresholds are determined by statistical analysis of mention counts per 30 minutes from the previous day.

Burning occurs continuously, with the burning rate updated every 30 minutes.

> Technical Detail (Optional): Since we burn a percentage of the remaining coins in the pool, we never burn them all—the effect compounds. For example, 30 consecutive hours of Extreme burning would result in 100% - (100% - 1%)^30 = 26.03% of liquidity burned (not simply 30 \* 1%).

#### Burning Effect Strength

Compared to active trading, coin burning generally has a lower price impact:

* If we collected $100,000 USD during the Nursery stage and transitioned the coin to Arena, at extreme temperature, we burn 1% of coins in the liquidity pool hourly, increasing the price by 1% per hour through burning
* However, during the same hour, traders might buy coins worth $5,000 USD, driving the price up by nearly 5% ($5,000 / ($100,000 + $5,000))
* Or they might sell coins (purchased during Nursery) for $5,000, driving the price down by more than 5% (-$5,000 / ($100,000 - $5,000))

Thus, while the burning mechanism provides a small yet reliable and persistent upward pressure on prices (burning can occur rapidly, slowly, or stop entirely), trading activity can have a more significant impact. Even at extreme temperature, prices can decrease due to sell-offs or increase due to buying activity even if the burning rate is 0.

**Long-Term Burning Effects**

Burning consistently drives prices upward. To better understand the long-term effects of burning, let's consider an example:

A phrase (e.g., "to the moon") in Arena has $100,000 USD and 476,190.47 coins in its liquidity pool, resulting in a current price of $100,000 / 476,190.47 = $0.21 USD per coin.

**Sell Scenario** Consider a user holding 20,000 coins (purchased during Nursery):

* If they sell all 20,000 coins now, they would receive an average price of $0.2015 (accounting for slippage)
* The new current price in the liquidity pool would be $0.1934
* The overall price impact would be 0.21 / 0.1934 - 1 = -8.56%

Now, let's examine an alternative scenario with burning:

* No trading occurs for some time, with only burning happening over 100 thirty-minute intervals at Extreme temperature
* The total liquidity burned would be 1-0.99^100 = 63.4%, leaving only 174,301.11 coins in the liquidity pool
* The current price would be $100,000 / 174,301.11 = $0.5737 (173.2% higher than the initial $0.21)
* When the same user sells their 20,000 coins, they would receive an average price of $0.514649 (a much better outcome)
* The new current price in the liquidity pool would be $0.4616764
* The price impact in this scenario is 0.5737 / 0.4616764 - 1 = -24.26% (significantly higher than in the initial scenario)

Thus, burning increases prices but leads to greater price impact from sells (when the coin quantity remains constant).

**Buy Scenario** Now, let's consider another user, this one with $4,000 USD and no coins:

In the first scenario (no burning):

* When the user buys coins worth $4,000 USD, the average price would be $0.2184
* The new current price in the liquidity pool would be $0.227136
* Price impact: 1 - 0.21 / 0.227136 = +7.544%

In the second scenario (after burning):

* When the user buys coins worth $4,000 USD, the average price would be $0.5966
* The new current price in the liquidity pool would be $0.62051392
* Price impact: 1 - 0.5737 / 0.62051392 = +7.544%

As we can see, burning doesn't affect the price impact of buys (when the USD amount remains constant).

**Conclusion** Burning increases price sensitivity to sells while maintaining sensitivity to buys. As a result, **it accelerates the time until a price crash occurs!** We make no secret of this—all meme coins (not just those in Trend Arena) eventually crash, but in Trend Arena, they can be instantly reborn at the initial price of $0.01, and the cycle begins anew!