Note: The first section of this article explains the Binance Coin (BNB) burning system on the Ethereum network. Binance Coin is currently on the BNB Beacon Chain and the burning process has changed. However, the material is relevant for all ERC-20 tokens that are burned.
Coin burning is the process of permanently removing coins from circulation, reducing the total supply. We will explain how burning works using Binance Coin (BNB ERC-20) as an example. The previous BNB contract on the Ethereum network can be found here.
When Binance Coin was part of the Ethereum network, the Binance platform carried out periodic burns of coins using a smart contract function called the burn function. The BNB burn occurs every quarter until 100,000,000 BNB have been destroyed, which is 50% of the total BNB ever issued (200,000,000 BNB).
The amount of BNB coins burned depends on the number of transactions on the exchange over a three-month period. Thus, every quarter, Binance burns BNB in proportion to the total trading volume.
However, it seems that many people still don't understand how coin burning works. The purpose of this article is to provide relevant information about the burn function and quarterly BNB burns.
How it works?
Token burning occurs in the following order:
The owner of the cryptocurrency activates the burn function, declaring that they want to burn the specified number of coins.
The smart contract checks whether a person has a specified number of coins in their wallet. The burn algorithm only allows positive numbers.
If a person does not have enough coins or the number specified is invalid (e.g. equal to 0 or -5), the burn function is not activated.
If the specified number is valid, then the coins will be deducted from the wallet. The value of the total supply of the coin will then be updated, which means the coins specified in the smart contract will be completely destroyed.
If you perform the burn function, your coins will be destroyed forever. It is impossible to restore coins after burning, and thanks to blockchain technology, the fact of burning can be easily verified in the blockchain browser.
In other words, the Binance Coin contract has a burn function that is available to all holders at any time. Using this function, you can permanently remove a specified number of coins from the circulation of the blockchain network. All coin burns are recorded as transactions on the blockchain. This ensures transparency: anyone can verify that the coins were destroyed.
After the quarterly coin burn, Binance makes an official announcement indicating the number of BNB burned (based on trading volume for the quarter). You can check all BNB ERC-20 burn transactions in an Ethereum blockchain explorer such as Etherscan. Burn transactions are public, irreversible, and permanently recorded on the blockchain.
In Etherscan, you can view the burn transaction details in the Input Data field.
You can check the amount of BNB burned by clicking on the Decode Input Data button. The number contains 18 decimal places. In this example, 1,623,818 BNB were burned.
Current Binance Burn Feature
Since the launch of BNB Beacon Chain, BNB ERC-20 tokens have been gradually replaced by native Binance Coin (BNB BEP-2). This means that coin burning now takes place on the BNB Beacon Chain rather than the Ethereum network.
It is worth noting that all BNB ERC-20 coin burns have been duplicated on the BNB Beacon Chain to ensure the same total coin supply. Thus, 11,654,397 BNB ERC-20 tokens previously burned on the Ethereum network were also burned on the BNB Beacon Chain (immediately after the mainnet launched). You can check this transaction in the BNB Beacon Chain explorer. You can also check the total supply of BNB.
The current burning mechanism for BNB coins is not based on a smart contract, but on a specific command in the BNB Beacon Chain. More information can be found on the BNB Beacon Chain documentation page.
As of April 2022, Binance has completed 19 BNB burns. A total of 36,723,852.37 BNB were burned, reducing the total supply by 18.36% of the total (currently 163,292,674.61 BNB in circulation).
Timeline of c;bufybz BNB (quarterly coin burns).
