14th BNB Burn | Quarterly Highlights and Insights from CZ
For our 14th quarterly BNB Burn (October to December 2020), Binance burned a total of 3,619,888 BNB, equivalent to $165,791,000 USD worth of tokens. Binance CEO CZ also shared a new plan to accelerate BNB burns, as well as his thoughts on crypto’s progress so far this year.
For this past quarter, we just burned 3,609,050 BNB, plus 10,838 BNB from the Pioneer Burn Program, for a total of 3,619,888 BNB. This effectively took $165,791,000 worth of BNB out of circulation forever. With this recent burn, the total supply of BNB has officially decreased from 174,152,713 BNB to 170,532,825 BNB.
As usual, I will take this opportunity to share a few thoughts.
Accelerated BNB Burn
Since launching BNB and Binance three and a half years ago, Binance has committed to burn 100 million BNB, or half of the total supply. Initially, the speed of the burn was associated with trading volumes on Binance. This turns out to be somewhat “slow”, or at least slower than we originally anticipated. This is largely influenced by the rapid rise of BNB’s price, which has risen 43,000% since its ICO in 2017, as of the time of writing this article.
Over the last three and a half years, we have burned about 13% of the promised amount, with a total USD equivalent value (nominal) of $426,304,000. Even though this is an impressive amount for a three-year-old startup, at that rate, it would take roughly 27 years to finish the burn. So, we thought it’s time we speed it up a bit. Exactly how much faster? We are not 100% sure. The current accelerated burn would put the trajectory to be around 5-8 years to finish the 100 million BNB. But a number of factors could change the accelerated part in the future, including BNB price fluctuations, overall market conditions, and more. The key takeaways are:
No changes to our existing commitments to burn 100 million BNB.
We are just burning a bit more each time, faster. Logically, there should be no reason to be upset that we will burn some more coins from our reserve at a faster rate.
How much faster? This is the first accelerated burn, and we will see about the future ones when the time comes.
One negative side effect may be that you won’t be able to use the burn number to reverse calculate Binance revenues, etc. You may still be able to infer that our revenues are lower than a certain number. But it will be a rough guess at best.
Some of you may hate me for saying it, some of you may like it, but all I got to say is:
I told you so.
(Alright, I stole that line from A. Pompliano.)
Jokes aside. When I saw how Bitcoin has risen to new heights during the last quarter and early this year, I can’t help but remember those familiar feelings from 2013, and 2016-2017. To me, I am not surprised by Bitcoin’s rise. The fundamentals of bitcoin have not changed. It is a far superior form of asset, currency, money, ideology, tool, and technology than anything else that has come before it.
Even at $42,000, I know we are just at the beginning. For a while, a few people tried to laugh at me for the “Slap yourself if you sold bitcoin under $10,000” tweet. I assume they are no longer laughing now. I have since made more tweets revising the number to $100,000 and $249,000. Honestly, I could add $1 million, $10 million and more. I am not good at predicting the future. I don’t know when they will happen, I only know they will.
Given that I am extremely bullish on bitcoin, where do other coins stand for me?
I am not a bitcoin maximalist; I am not a DeFi maximalist; and I am not a CEX maximalist. I believe they all serve different purposes in our ecosystem. All of them are important. Even stablecoins and fiat channels are important. People don’t teleport into crypto, they migrate from fiat. We need bridges to get them in.
Bitcoin is the entry coin into crypto. It’s the coin that people learn about first when they learn about crypto or blockchain. It is also the most decentralized, most neutral, most apolitical, and least influenced by any one individual or entity. It also has the dominant network effect. As such, I believe Bitcoin will continue to act as the global reserve cryptocurrency for a very long time to come.
Bitcoin has its limitations though. It is a fairly basic blockchain. Given its decentralized nature and history of disagreement between core developers, the technical development progress may be slow. Most importantly, it has capacity limitations. It can only process about 350,000 transactions per day (not including L2 solutions), whereas mass adopted applications like Facebook or Tiktok handle tens of billions of transactions (or interactions) per day.
For this reason, I believe we still need many other blockchains for true mass adoption. I generally call these application blockchains. They could be geared towards specific and/or high throughput applications used by the masses. As I have said a few times, I see a future world with thousands of blockchains and millions of tokens. Hence, exchanging them is going to be a high demand activity.
BNB has evolved so much from the original “discount coupon” token of a CEX to being a full fledged native coin on not just one, but two native blockchains. Its use cases have also expanded to hundreds of applications on numerous platforms and projects within the crypto ecosystem. This has been reflected in the 43,000% increase in BNB price since its initial sale.
In the longer term, we hope BNB will be the native token on multiple application specific blockchains. BNB was never intended to replace Bitcoin or Ethereum. We have always wanted BNB to be an application-level blockchain. To become a true mass-adopted application, BNB must be able to facilitate billions of transactions per day. In its current form(s), we still have a long way to go. We are working on it.
In the last quarter, we have seen significant growth in Binance Smart Chain (BSC), reaching about 40% of Ethereum’s network activities within one quarter of launching.
100+ projects now use Binance Smart Chain
820,000 unique Binance Smart Chain addresses have been created
3,000,000 BNB are staked by Binance Smart Chain validators with ~60,000 BNB staking rewards so far
15 wallets are offered on Binance Smart Chain
Around 3,900,000 BEP-20 BNB are used or stored on Binance Smart Chain
We fully appreciate all the effort these projects have put in to grow the BNB ecosystem.
On the CEX front, we saw massive growth in Q4, with frequent and consecutive all-time highs (ATH) in both trading volume and user traffic. We hit $20 billion in daily trading volumes recently.
We have also brought DeFi experiences to Binance.com through our unique and innovative LaunchPool product. Based on yesterday’s prices, we have distributed over $100 million in new tokens to users who staked BNB, BUSD, BTC, ETH, DOT, CHZ and other coins in Launchpool.
Within a year since its inception, Binance Futures is now the largest derivatives exchange by volume and open interest.
November was a record-breaking month for us. Binance Futures generated more than $450 billion in volume, almost a 200% increase from the previous month as Bitcoin rose to pre-all-time high levels. Large-cap altcoins also performed equally well as bringing in a massive surge of trading activity across the board. In December, we registered a new all-time high in 24-hour volume of over $38 billion and a record open interest of over $2.7 billion, by far the largest numbers the industry has ever seen. And this record was overtaken multiple times again and again in the new year so far.
Fiat and Payment Channels
As we continue to scale and improve our technology, we are also building out our global fiat payment channels in order to allow more users to come into crypto. Together with our partners, we’re currently able to service users in 180+ countries with credit cards through our Buy Crypto service. We also have banking channels that can service EUR, GBP, AUD, NGN, BRL, and USD. Traditional corporates/investors are also increasingly joining our platform and using our banking channels in order to allocate more of their portfolio into crypto. We expect these demands to continue to grow exponentially in 2021 and will make sure our payment channel partners can scale up with us, in order to ensure the best user experience.
Last quarter, Binance Charity launched NFT for Good, an open platform developed on Binance Smart Chain (BSC) that enables everyone to convert their art and creativity into a meaningful global action targeting social and humanitarian issues. In addition, we issued NFT to volunteers of the Maitian Gongyi project, which supports sex education in rural China. As of last quarter, we have raised about $60,000 in crypto from 77 donors in the Rebuild Notre Dame project and donated the funds to Friends of Notre Dame de Paris, which will restore the large paintings in the cathedral.
Last quarter, we launched Binance Earn, a new one-stop hub where you can see and use all our crypto financial products, including crypto savings, staking, and DeFi-like services, among others. We continued to pick up market trends and provide competitive products to our users. Here are some of the recent highlights from Binance Earn:
Binance Liquid Swap supports 12 liquidity pools where you can use Bitcoin and various stablecoins and fiat currencies. Since its launch three months ago, Liquid Swap has recorded $245 million in daily trading volume. If we compare Liquid Swap with other liquidity pool platforms, it would be the third-largest platform of that kind in the world right now, behind only UniSwap and SushiSwap.
We introduced ETH 2.0 Staking in December, and through this service, you can participate in ETH 2.0 from the comfort of your Binance account, without needing to lock 32 ETH from your funds. Since we introduced this service, which only requires a minimum of 0.0001 ETH to join, we have grown the number of ETH-staking users on Binance by 24x, and the total value of ETH locked increased by 7.5x.
In Q4 of 2020, we were able to deliver education to almost two million users around the world. An achievement we’re extremely proud of, however, it’s one that we will continue to challenge. We want to educate the world about crypto and blockchain and we won’t stop, even after we achieve this.
We experienced a few system issues in the last quarter. The truth is, we are likely to continue to experience some issues here and there as user demand continues to grow exponentially. I wish I could say we just bought 100x the servers and we can guarantee to handle 100x the volume. Things in real life are not as simple. Will try to explain it to the best of my ability here.
Our systems are large and complex. Think of it as a growing city. We design the city with buildings and roads to handle a certain amount of population and traffic, with room for growth in mind. In our trading world, low latency is paramount. So, we need to maximize the speed of travel and minimize the distance from any point to another within the city. We want the “city” to be as compact as possible. But compact cities won’t have wide roads and large parking lots, which creates problems for handling large amounts of traffic. And our traffic is growing exponentially. We could design the city with 10-lane roads and huge parking lots everywhere, but that would increase the time it takes to travel from one place to another.
In trading, to ensure the best price of execution, all trades have to be matched in one central place: the matching engine, call it the “city hall”. And in reality, our “city” covers the entire world. This is the first time that people from everywhere in the world can trade directly on an exchange and match against the best counter price (best liquidity, lowest slippage), with no middle man involved (low fees). The technology is just about to allow this on a massive scale, but there are still some interesting challenges to be solved.
You may have a few questions.
Why don’t you just stress test it and fix it? We do lots of stress testing, but it’s never the same as the real load in production. It’s like you can’t predict the traffic pattern in a city 100% accurately during the planning stage. If Apple opens a store on a block, you will see congestion on that block when they launch a new iPhone. Same thing happens with us. Sometimes a new Launchpad project or a new listing will cause different traffic patterns. Other times, Bitcoin price mooning will cause a different traffic pattern. We do try our best to predict and/or fix before or after the fact, but there are bound to be issues here and there as we grow.
How do traditional stock exchanges solve this problem? Well, they don’t. They typically only serve a few hundred brokers, who then in turn serve retail users directly. When you submit an order, you are almost guaranteed to be submitting that order to a broker, and not the exchange directly. These brokers typically need to charge you high commissions as they often have expensive expenses. And they also make your orders slower. On Binance, we keep it fast and low cost for you.
Why doesn’t xyz (crypto) exchange have issues? Well, the smaller exchanges have less traffic. Even with that, I know all exchanges have issues. Mind you, liquidity on smaller exchanges is far worse, and this will have a real cost to you as the slippage there will be high. This is why big exchanges have a virtuous network effect, and one of the key reasons why everyone wants to use the biggest exchanges.
Why don’t other large internet sites have similar issues? Well, most popular sites all had many issues as they were growing up, including some of the most popular social media sites, search engines, etc. Also, these sites are able to use a lot more caching than an exchange. If your search results are a few minutes old, you can’t notice it. If you see your friends post a few minutes after he posted, you won’t complain. But if you don't see your order response within a few milliseconds after you post it, you will panic. There are different requirements for different platforms.
Am I saying we will always have problems? No, we will fix these issues and become more stable as we grow. But I am just being honest in setting expectations that it will take some time for any platform/startup to completely stabilize its technology stack. And we are still at our exponential growth stage. You should manage your trading with the correct expectation in mind.
Having said all that, I am fully confident that Binance has by far the best technology platform in the industry. You are already using the best.
We are also struggling to keep up on the customer support front. This is easier to understand. We couldn’t have hired 20x the support staff just to wait for the exponential growth; they would be sitting there with not much to do, and it would be very demoralizing. But when the market explodes by 20x in volume within a 6-month period, it’s difficult to grow our CS team size by 20x in that amount of time, not to mention that recruiting, interviewing and training all take time.
We are working hard on a number of initiatives to improve our customer support, including ramping up our staff, automating CS using more AI bots where possible, and streamlining our products and user experience so that you don’t need to talk to a CS agent. We are also actively recruiting for Binance Angels around the world. Our 200+ Angels who help support our users and moderate 40+ global communities have also been a great help during this time.
2021 has been far better than 2020 thus far, let’s hope it continues. Bitcoin and BNB have broken their previous ATHs and are in price discovery now. I could be wrong here, but every indication suggests it will likely continue. What’s good for Bitcoin is generally good for the crypto industry. People enter via Bitcoin and will almost certainly eventually explore other things in the crypto space. I believe we will continue to see DeFi to grow, more entrepreneurs using blockchain to raise funds for their projects, more people investing in these projects all over the world, more fiat money flowing into crypto, more usage of fiat channels, more crypto payments, more cross-border remittances, more corporate treasury allocating funds into crypto, more hedge funds doing principal trading in crypto, more crypto games, more NFTs, more sports tokens, more wallets, more exchanges, more educational content (Binance Academy, Binance Research), more data content (CoinMarketCap), more charitable initiatives (Binance charity) and more people using crypto.
And a whole lot more growth in crypto use cases that I didn’t list here and may not even have imagined yet.
As I said in my recent New Year Message, in terms of building our global crypto ecosystem, there is still much more work to be done. Our team continues to put our heads down and build better products and services for everyone.
As always, we thank you for your unwavering support and contributions to the Binance ecosystem!