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## Executive Summary Major centralized exchanges (CEXs) are employing diverse token burn models that are now subject to intensified investor and regulatory scrutiny. The market increasingly emphasizes the consistency, transparency, and regulatory alignment of these mechanisms over the sheer volume of tokens burned, influencing sustainable value creation for platform tokens. ## The Event in Detail Token burn mechanisms, designed to permanently remove cryptocurrency tokens from circulating supply, are broadly categorized into three types across centralized exchanges. These include profit- or revenue-linked models, as seen with **Gate**, **KuCoin**, **MEXC**, and **Rollblock**, which aim to directly tie token value to the exchange's financial performance. For instance, **Rollblock (RBLK)** utilizes up to 30% of its platform profits to buy back RBLK tokens weekly, with 60% of those tokens subsequently burned and the remaining 40% allocated to staking rewards, creating a consistent deflationary pressure. Formula-driven or fund-driven models are employed by exchanges such as **Binance**, **OKX**, and **Bitget**. **Binance's (BNB)** auto-burn mechanism adjusts the burn quantity based on the price of BNB and the number of blocks generated on the **BNB Chain**, targeting a circulating supply of approximately 100 million BNB. In Q2 2023, **Binance** burned over 2 million BNB, valued at over $600 million. Similarly, **Hyperliquid** operates a deflationary model for its **HYPE** token, allocating 97% of protocol fees to buybacks and burns, resulting in an annual supply reduction of 4%. By July 2025, this mechanism had reportedly destroyed 28.5 million HYPE tokens, valued at $1.3 billion. The third category encompasses governance-driven models, exemplified by **Bybit** and **HTX**. Token burns are executed through irreversible smart contract operations, such as sending tokens to a verifiably uncontrolled "burn" address or utilizing smart contract functions that reduce the total supply. Unlike the automated, protocol-level burns seen in systems like **Ethereum's EIP-1559**, corporate-driven models like **Binance's** quarterly burns resemble traditional stock buybacks, necessitating careful treasury and profit allocation in financial statements. ## Market Implications The diverse approaches to token burning have significant implications for market sentiment, investor confidence, and regulatory oversight. There is growing investor scrutiny on the tokenomics of CEX platform tokens, with a clear preference for transparent, consistent, and profit-linked burn mechanisms. Exchanges with such models may experience increased investor confidence, while those with opaque or frequently altered models, such as **Binance's** past adjustments, could face skepticism or regulatory challenges. The market now values the predictability and reliability of burn mechanisms more than the sheer volume of tokens destroyed. Post-**FTX** collapse, user trust in CEXs has diminished, leading to increased demands for transparency and protection measures. In response, exchanges like **Binance** and **Bitget** have augmented their protection funds. The success of exchanges in this competitive landscape is increasingly tied to prioritizing security, transparency, user trust, and active ecosystem involvement. While token burns can contribute to scarcity and upward price pressure, their long-term efficacy in driving value hinges on real network adoption, utility, and use cases. Risks associated with burn programs include market dependency, potential for slippage and front-running on decentralized/centralized exchanges during conversions, and the limitation of resources for development, audits, and incentives if too high a percentage of fees are allocated to burns. ## Expert Commentary Market sentiment has shifted, with experts noting that the consistency and predictability of burn mechanisms are now valued above sheer volume. Profit-linked models are increasingly considered optimal for directly correlating token value with the health of the underlying exchange. While the impact of buyback and burning on token price remains controversial, with some arguing it creates no intrinsic value, the consensus is that strong and consistent cash flows, coupled with buying pressure from burns, can contribute to stronger token performance. New entrants like **Hyperliquid** are actively reshaping industry expectations by integrating and marketing transparent, continuous burn mechanisms into their fiscal management strategies. This approach is compelling older exchanges to adapt their own models. However, it is also emphasized that burns alone are insufficient for sustained growth; they must be accompanied by genuine network adoption, utility, and robust use cases. ## Broader Context Regulatory considerations are paramount in the design of token burn mechanisms. Decoupling burn mechanisms from direct profit linkages can mitigate the risk of tokens being classified as securities by regulatory bodies like the **US Securities and Exchange Commission (SEC)**, though this may also reduce transparency for token holders. Regulators are actively monitoring for potential supply-manipulation tactics within token burning programs, underscoring the need for clear disclosure and compliance with evolving regulations. The broader regulatory environment indicates an acceptance of crypto in the U.S.; however, many existing blockchain architectures lack the necessary privacy and compliance features for institutional adoption. The challenge for the Web3 ecosystem is to reconcile blockchain's inherent transparency with the requirements for privacy, selective disclosure, and compliance to meet the legal and operational standards of regulated industries. Emerging frameworks, such as zero-knowledge proofs, are being developed to bridge this gap, enabling privacy and compliance without resorting to centralized gatekeepers. Platforms like **Hyperliquid**, with their strategic positioning bridging centralized and decentralized finance (CeFi/DeFi), are attracting institutional capital, demonstrated by $3.5 billion in total value locked (TVL) and $29 billion in 24-hour trading volume, signaling a scalable alternative to traditional CeFi platforms grappling with transparency and operational risks.
## Executive Summary Crypto exchange **Gate** has launched **Gate Layer**, a new high-performance Layer 2 blockchain built on the **Optimism OP Stack** and fully **EVM-compatible**. Concurrently, the exchange has revamped the **GT** tokenomics, positioning **GT** as the exclusive gas token for **Gate Layer** while maintaining its deflationary burn model. This strategic initiative aims to significantly enhance transaction throughput, reduce costs, and solidify **Gate**'s position as a comprehensive **Web3** infrastructure provider. ## The Event in Detail **Gate Layer** is engineered to deliver scalable, reliable, and cost-efficient infrastructure, leveraging **GateChain** as its secure settlement layer, backed by **GT** staking. The network integrates native Blob-based data availability and, with optimized parameters, achieves a reported throughput of over 5,700 transactions per second (TPS) with ultra-low transaction fees. The platform supports a diverse range of decentralized applications, from meme ecosystems and perpetual exchanges to gaming, DeFi, and social platforms. Key integrations include **Perp** (a perpetuals hub), **Gate Fun** (a no-code incubator for token launches), and **Meme Go** (a real-time cross-chain meme token tracker). The **GT** token, central to this ecosystem, now serves as the exclusive gas token for all transactions on **Gate Layer**. Its tokenomics maintain a dual burn model, with over 180.5 million **GT**—approximately 60.18% of its initial supply—already burned to a dead address through routine on-chain transactions. The current circulating supply stands at 82.36 million **GT**, with burns projected to continue through 2035. For example, a recent quarterly burn on July 7, 2025, removed 1,922,789 **GT**, valued at $39 million, from circulation. The **GateChain v20** upgrade, implemented on September 15, 2025, further enhanced the underlying infrastructure with **Cancun-compatible EVM** improvements and **EIP-4844 (Blob Transactions)**, specifically to support Layer 2 scaling and improve developer appeal. ## Market Implications **Gate**'s launch of **Gate Layer** intensifies competition within the exchange sector, particularly among entities seeking to deepen liquidity and expand their **Web3** ecosystems by offering proprietary Layer 2 solutions. This strategy mirrors moves by other major exchanges, such as **Coinbase** with its **Base** blockchain and **Kraken**'s planned **Ink** network. The increase in transaction throughput and reduction in costs provided by **Gate Layer** could attract a larger user base and more decentralized applications, fostering ecosystem growth. From a tokenomics perspective, the designation of **GT** as the exclusive gas token for **Gate Layer**, combined with its continued deflationary burn model, aims to increase demand and reinforce long-term scarcity. However, a scheduled unlock of 6.67 million **GT** (0.67% of circulating supply), valued at approximately $110.97 million, is set for September 26, 2025, stemming from team and advisory vesting schedules. While past unlocks have shown muted volatility, this event introduces potential sell pressure. The current trading price for **GT** is $16.43, reflecting a -4.68% monthly change. ## Expert Commentary Market analysis suggests that while routine burns reinforce long-term scarcity for **GT**, improved developer appeal resulting from upgrades like **GateChain v20** could drive more decentralized applications to **GateChain**, thereby increasing **GT**'s utility as a gas token. This enhanced utility and continued deflationary tokenomics are generally viewed as positive factors for the token's valuation, assuming sustained platform growth. ## Broader Context **Gate**'s "All in **Web3**" strategy, exemplified by **Gate Layer** and its integration with diverse tools, positions the exchange as a full-stack **Web3** provider. This aligns with a broader industry trend where centralized exchanges are developing their own Layer 2 networks to bridge **CeFi** and **DeFi** and capture more market share. For instance, **Base** has emerged as a top-performing Layer 2 in 2024, driven by high transaction volumes, **SocialFi** applications like **Friend.tech**, and integrations such as the **Coinbase Smart Wallet**. Similarly, **Blast** has seen significant growth fueled by incentive programs and yield opportunities. **Gate Layer**'s **LayerZero** integration also enables native interoperability across multiple blockchains, extending its reach beyond a single ecosystem. While Layer 2 solutions offer significant advantages in scalability and cost, a common challenge observed across the sector is the lack of direct value accrual mechanisms for Layer 2 tokens, often characterized by a "low float, high FDV" dynamic, which can lead to selling pressure from ongoing token unlocks. **Gate**'s comprehensive approach, including a $10 million strategic investment in **The Open Network (TON)** to accelerate **Telegram-based** projects, underscores its commitment to expanding its **Web3** footprint and fostering wider ecosystem adoption.