Minting and Burning

Minting and burning are the dual processes used to control the supply of a token within a protocol. Minting is the creation of new tokens, often triggered by a deposit of collateral.

Burning is the destruction of tokens, typically occurring when a user redeems their collateral. This mechanism ensures that the circulating supply of a wrapped asset accurately reflects the amount of underlying collateral held in reserve.

It is a core feature of stablecoin and synthetic asset design. These actions are governed by smart contracts to ensure transparency and prevent unauthorized supply expansion.

By maintaining a strict correlation between minting and burning, the protocol preserves the value peg of the asset. It is a fundamental component of tokenomics.