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Gala Games, the Web3 startup behind games such as Mirandus, Grit, and The Walking Dead: Empires, recently announced burning of a substantial quantity of GALA tokens, virtually depleting its treasury. This decision was driven by the desire to alleviate concerns about a potential future token sell-off, which could lead to a price decline. The company removed almost 21 billion GALA tokens worth over $600 million at the time of the burn.
The Process and Rationale Behind the GALA Token Burn
Gala Games detailed its token burn approach in its “2023 Vision Paper,” where it initially planned to burn 2 billion GALA tokens. It later added another 3.96 billion tokens to the burn, equivalent to the total revenue in GALA ever received by the company. The most significant burn, however, was of 15 billion tokens, a response to community concerns over the potential for a “dump and exit” scenario.
Gala Games President of Blockchain, Jason Brink, stated that the company envisions a sustainable ecosystem where they can live off the rewards received from the ecosystem rather than relying on a large pile of GALA tokens. This move ensures Gala Games’ long-term sustainability and increases rewards for Founders Node operators, which are expected to quadruple following the burn.
Why Burn Tokens?
Token burning is a strategy crypto companies use to stabilize or increase the value of their tokens by reducing the total supply in circulation. Apart from the above, there are also other factors, such as –
Price Stabilization or Increase
One of the primary purposes of a token burn is to reduce the total supply of a token in circulation, which can increase the scarcity of the remaining tokens. If demand remains the same or increases, this reduction in supply could lead to a rise in the token’s price.
Increased Trust
By burning a large number of its tokens, Gala Games has demonstrated its commitment to long-term sustainability, potentially increasing investor trust in the project. The burn also addresses concerns about a potential “dump and exit” scenario, where the company could sell off many of its tokens, leading to a price drop.
Increased Rewards for Node Operators
As stated by Jason Brink, President of Blockchain at Gala Games, rewards for Founders Node operators are expected to quadruple following the burn, which could incentivize more participation in the ecosystem and benefit existing operators.
Potential Future Demand
If the project continues to develop and attract more users, the reduced supply of tokens could lead to increased demand in the future, which could further increase the token’s price.
A prominent example of another project that has implemented token burns is Binance, which regularly conducts burns of its Binance Coin (BNB). Binance commits to burning a certain amount of BNB each quarter, based on the trading volume on its exchange. The second one is burning a portion of the BNB spent as gas fees on the BNB chain which is done on a real-time basis. The goal is to eventually destroy 100 million BNB, half of the total supply. This practice has been associated with periods of price increase for BNB and stabilizing the price of BNB.
The Aftermath of the Token Burn
Following the burn, the company’s treasury is now almost eradicated. Additionally, about 160,000 different wallets received upgraded GALA V2 tokens as part of a contract upgrade and re-issuance of the token. Notably, major U.S. crypto exchange Coinbase did not support or facilitate the GALA V2 airdrop, although a reason for this decision was not provided.
Conclusion
Gala Games’ decision to burn over $600 million in GALA tokens highlights the company’s commitment to addressing community concerns and maintaining a healthy token economy. By removing a significant portion of its reserves, the company aims to reduce the risk of a token sell-off and stabilize the value of the GALA token. This move aligns with Gala Games’ vision of a sustainable ecosystem based on the rewards generated within it and underscores its commitment to long-term success and community trust.
