The communications about how CATs work are misleading at best and outright incorrect at worst. A naive reading of the CAT standard information published in the announcement on November 15th by Chia Network strongly implies that CATs are somehow akin to real world coins and metal wherein they can always be melted down and reshaped into XCH. One could imagine Hephaestus at his forge, smashing CATs back into XCH.
“In the real world, it’s possible melt pennies into raw copper. In Chia, it’s possible to retire your CATs, which melt into XCH. (Obviously you aren’t allowed to mint your own pennies, or even to melt them. This is just an analogy.)”
However it appears this is not the case! CATs are governed by whatever TAIL was used during issuance and as such do not contain any special property which allows them to be reforged. Each CAT is strictly controlled by the Chialisp TAIL program used to create it. Further it is impossible to really understand how a particular CAT functions without knowing the exact details of its creation.
This situation is very unlike the ecosystem on Ethereum where the ERC 20 (and attendant family of upgrades) where lineage and functionality are much easier to verify and understand. As we move forward into the brave new world of CATs on Chia it seems that there may be many CATs created and if they do not include reversibility rules explicitly, the creation of said CAT effectively burns the amount of XCH used to create it.
Editor note: this is very interesting and I think it will create a situation where in order to evaluate a CAT and write about it I will need to see the TAIL code used to create it. It may also be worth someone tracking how much XCH has been converted into CATs total.