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Introducing BNB Auto-Burn: a new Protocol for the Quarterly BNB Burn

2021-12-21

At Binance we are committed to the development of the blockchain ecosystem. 

Over the past few years, the blockchain ecosystem has evolved in many ways as a result of the community’s feedback. Following in the footsteps of many other community-supported projects, BNB has been on its own evolutionary journey. We’ve been listening closely to the BNB Chain (former BSC) and BNB communities-and we are proud to announce the implementation of a new BNB Auto-Burn procedure effective immediately. 

BNB is its own living, breathing ecosystem. Therefore, in alignment with the interests of the BNB community, Binance is today announcing the implementation of a new BNB Auto-Burn procedure.  The newly introduced BNB Auto-Burn is designed to further build a healthy blockchain ecosystem together with the BNB community. 

What is BNB and its role in the blockchain ecosystem?

BNB is the native token that “fuels” transactions on BNB Chain (similar to gas on Ethereum). BNB is also necessary to participate in the decentralized on-chain governance of the BNB Chain. Binance does not control or operate the BNB Chain. 

BNB Chain (and thus, BNB) are supported by a community of users, developers, validators, and delegators.  In addition to on-chain transaction fees and uses, BNB is commonly used and accepted as a form of payment, by many different exchanges and businesses. Binance is one of them, but does not and cannot dictate who can acquire BNB or the ways in which BNB is used. You can see other applications that are unrelated to Binance that use or support BNB here.

How will BNB Auto-Burn work?

Currently, there are two main BNB burn mechanisms.  First, a portion of the gas fees spent on BNB Chain is burnt in real time as introduced in BEP95. Since BNB Chain’s Bruno upgrade on Nov 30, 2021, it burns approximately 860 BNB every day.  Second, Binance burns BNB quarterly based on Accelerated BNB burn.  Last quarter was the 17th burn, which removed 1,335,888 BNB from circulation. 

Going forward, the quarterly burn will be replaced with BNB Auto-Burn to provide greater transparency and predictability to the BNB Community.  BNB Auto-Burn will be both objective and verifiable, independent of revenues generated on the Binance CEX through the use of BNB, and will be automatically adjusted in that the burn amount will be based on the price of BNB, which, in turn, reflects the supply and demand for BNB, as well as the number of blocks produced during a quarter calculated on the basis of on-chain information.  The formula will be as follows:

B is the amount of BNB to burn.  N is the total number of blocks produced on BNB Chain during the calendar quarter.① P is an average price of BNB against the US dollar.② K is a constant value as a price anchor, initially set at 1000.③ BNB Auto-Burn will be halted when the total circulation of BNB drops below 100 million.

① BNB Chain’s typical block time is about 3 seconds, so the number of blocks produced in an hour would be approximately 1200 (3,600 seconds per hour, divided by 3).  Assuming there are three thirty-day months in a calendar quarter, N should be approximately 3600 ÷ 3 × 24 × 30 × 3 = 2,592,000, where 24 is the number of hours in a day, 30 the number of days in a month, and 3 the number of months in the quarter.

② P is the median value of a sampling on a widely accepted oracle price provider (e.g., ChainLink) on BNB Chain, and the sampling frequency is every 10,000 blocks, which is currently equivalent to approximately 8.3 hours.

③ The value of K is subject to change through a BNB Chain BEP proposal and community vote.

The chart below shows the expected quarterly BNB Auto-Burn amount for a range of BNB average prices.  After the implementation of BNB Auto-Burn, the projected burn amount based on the above formula will be publicly available.

The next stage of innovation

Since its introduction in 2017, BNB has evolved in so many ways as a result of the community’s feedback and support. Here at Binance, we believe that with the introduction of the BNB Auto-Burn, the next phase in the development of BNB and BNB Chain has begun. More importantly, the move cements the continuing evolution of BNB, which enhances its ability to help Build ‘N’ Build the blockchain ecosystem.

As always, we thank the communities for the unwavering support and contributions to the ecosystem. Let’s keep building!