There are times when you bump into things that you have no clue about, but you understand that it might come with great opportunities for profit. That is especially true in the world of cryptocurrencies.
Last week I heard of the Burning Drop on Kucoin for the first time. I stumbled upon it in a tweet as I wanted to find out if Kucoin was to have any "Spotlight" projects in the near future ("Kucoin Spotlight" is a token launchpad for brand new tokens, similar to an ICO/IDO).
I was confused at first about the Burning Drop and how it worked, but as I tried it, I quickly understood the logic and how it is supposed to work. There aren't a lot of good articles online describing it, and the official information from Kucoin is not necessarily so easy to understand, but if you want a good introduction, I suggest you read this article.
"Burning Drop" is what other people refer to as a launchpool.
It's simple. On Binance you stake some stable coin, sometimes BNB, and sometimes a respective token. As a reward, you will be given more a certain token. The same is happening on ByBit. You can remove your tokens from staking whenever you want to (no lockup), but there is normally a maximum length for launchpool projects, varying between 7 and 30 days.
Some difference between "Burning Drop" and a Launchpool.
There are some differences between the "Burning Drop" on Kucoin and the launchpool projects on Binance, ByBit, and other platforms.
First of all, you are locking up KCS tokens, and they are normally locked up for 20 days (you will see the exact information in the rules for that given "Burning Drop"). In other words, you cannot withdraw your tokens if you suddenly feel like.
The tokens you are rewarded with is not handed out on a daily basis or continuously. Instead, you get a portion of your tokens before trading starts of that given token on Kucoin. The rest of the tokens are handed out weekly or monthly (depending on the rules).
The biggest difference is that you can boost your rewards based on burning KCS to receive extra computing power. That sounds difficult, doesn't it? I would call it bribing the system. There is a maximum of 350 KCS that you can use for a "Burning Drop" (normally). After locking these, there is a short period of time in which you can burn addition KCS to get a boost of rewards (or computing power as they call it). By burning KCS tokens, you are bribing the system, and as a result, you will receive more of the given token per KCS tokens you have staked. You receive your KCS locked tokens in return, but the KCS tokens you burn for a boost are burned and gone forever.
What was my experience?
I sold my first batch of tokens immediately upon TGE (after 2 minutes). As a result, I was lucky enough to get 3x the value in USD compared to the KCS tokens I burned. I burned less than 1 KCS, so not much, but at least I haven't lost any money. And knowing that I only receive 40% of the tokens, I will still receive more in the future. So far, so good (of course, the token has dropped 3x in price since I sold, but that doesn't matter so much anymore).
Seems like something you have to time almost perfectly from the amount of KCS to burn so you get more power basically like you mining the token and then hit the market to sell unless you believe in the project but from what I have seen prices drop dramatically so better to buy later after launch? It's a race against time doesn't it? Still exciting for trading 😅🤷
There is only a few hours in which you can burn those KCS tokens, and if you burn them then, it will boost your earnings throughout the earnings period... doesn't seem so complicated, but there is some complicated math below it all, but I don't care so much. I guess based on my experience that I'll burn somewhere between 0,5 and 1 KCS per burning drop, as it will give me more tokens than those not burning, but without experiencing a big risk at all.