# Burn rate

Make sure you understand how the [Token ratio](https://docs.watt.si/the-protocol/watt-assets/token-ratio) works before exploring the Burn rate.

**Burn rate indicates how incurred fees are split between burning liquid-staked Watt tokens and rewarding liquidity providers in the Watt token pool.** For example, if the Burn rate is set at 40% for a certain token, this means 40% of eligible fees are dedicated to burning Watt tokens, while the remaining 60% of eligible fees are distributed among liquidity providers in a Raydium pool.

Increasing the Burn rate favours Watt token holders, whereas decreasing the Burn rate favours liquidity providers.
