Résumé

Crypto burning is a mechanism used to remove units from circulation, thereby permanently reducing the total supply. Many cryptocurrency projects perform periodic unit burns to create a deflationary effect.

BNB adopts two burn mechanisms, which will reduce its total supply by 50% in the long term. The first mechanism consists of destroying a portion of the BNB spent as gas fees on the BNB Smart Chain (BSC) (applied in BEP-95). The second consists of quarterly BNB burn events.

Previously, quarterly BNB burns were based on BNB trading volume on the Binance exchange. But in December 2021, Binance announced that the quarterly burn would be replaced by a new BNB auto-burn.

The BNB auto burn mechanism will automatically adjust the amount of BNB to be destroyed based on the price of BNB and the number of blocks generated on the BNB Chain during the quarter. This provides greater transparency and predictability to the BNB community. Some users' lost tokens may be counted toward the BNB to be destroyed, allowing for reimbursement of said users under the BNB Pioneer program.

What is a coin burn?

Token burning is the process of permanently removing cryptocurrencies from circulation, thereby reducing the total supply. In other words, the units are destroyed and can no longer be used for trading or anything else.

By making the currency more scarce, the unit burn aims to create a deflationary effect and potentially increases the valuation of the crypto for the benefit of its holders. For BNB, the goal of burns is to gradually reduce its total supply until it is below 100 million BNB.

Although there are several ways to destroy cryptocurrencies, some projects implement a specific burn functionality as part of their protocol. For example, BNB included a burn function within its smart contracts when it initially launched.

With the rise of decentralized finance (DeFi) protocols, token burning has become more common in the blockchain space. Ethereum (ETH) began destroying the ETH base fees of all blockchain transactions after implementing the London hard fork upgrade in 2021.

To destroy tokens, a certain amount of cryptocurrencies is sent to a smart contract or wallet address that cannot be used for transactions and does not have a private key. This means that once the funds reach the address, they will be lost forever and therefore removed from the amount of tokens in circulation.

For more details on how a token burn works, see What is a token burn?.

How are BNB destroyed?

BNB is the utility token that powers the BNB and BSC ecosystems. The initial total supply was 200,000,000 BNB, but it is gradually decreasing thanks to token burn. Burn events will occur until 50% of the total supply is destroyed, reducing it to less than 100,000,000 BNB.

There are two methods to destroy BNB. The first consists of quarterly BNB burn events. The second was introduced in the BEP-95 update and involves destroying a portion of the BNB spent on gas fees on the BNB Smart Chain (BSC).

Previously, quarterly BNB burns were based on BNB trading volume on the Binance exchange. But in December 2021, Binance announced the new automatic burn mechanism. The BNB auto burn mechanism will automatically adjust the amount of BNB to be destroyed based on the price of BNB and the number of blocks generated on the BNB Chain during the quarter. This provides greater transparency and predictability to the BNB community.

Quarterly BNB Burn

As of July 2022, Binance has completed 20 BNB burn events. A total of 38,683,447.66 BNB were destroyed, reducing the initial supply of 200 million by 19.34% (the total supply is now 161,316,552.34 BNB).

History of BNB burns (quarterly burns).

In quarter#18(January 2022), the first automatic quarterly BNB burn took place. A total of 1,684,387.11 BNB was removed from circulation, including 6,296.305493 BNB destroyed as part of the Pioneer Burn program.

The BEP-95 burn mechanism

In early 2021, Binance CEO CZ shared his plan to accelerate the burn of BNB, as the overall burn rate was lower than he initially anticipated. In order to speed up the process, Binance introduced a new burn mechanism via BEP-95 in November 2021.

BEP-95 is an evolutionary proposal that adds a real-time burn mechanism to the Binance Chain. The smart contract automatically burns part of the gas fees collected by the validators of each block. As more people use the BNB Chain, more BNB will be burned, thus speeding up the burn process.

As of July 2022, the BNB Chain destroys approximately 285 BNB per day, and the progress can be followed on Twitter. As BEP-95 depends solely on BNB Chain network activity, the BNB burn will continue even after the 100 million burn target is reached.

What is BNB auto-burn?

As mentioned, BNB auto-burn will automatically adjust the amount burned based on the price and supply and demand dynamics of BNB. This means that if the price of BNB decreases, the amount of BNB destroyed will increase.

The automatic BNB burn is both objective and verifiable. It aims to improve the transparency and predictability of transactions. Unlike the quarterly burn, the automatic burn does not take into account the BNB trading volume on the Binance exchange. Instead, it uses information from the blockchain to calculate the amount to destroy.

Once the total amount of BNB in ​​circulation is below 100 million, the automatic BNB burn will stop. However, the BEP-95 mechanism will continue to destroy BNB. The automatic BNB burn follows a formula to automatically destroy BNB, this is based on blockchain data, namely the number of blocks generated and the average price of BNB:

B represents the amount of BNB to be destroyed. N is the total number of BSC blocks produced during the quarter. P is the average price of BNB, and K is a constant (initially set to 1000). For more details on how this formula works, you can check out this blog post.

What is the BNB Pioneer Burn Program?

In 2020, Binance launched the BNB Pioneer Burn program to help users who lost their BNB funds by accident. Users who meet certain criteria can submit a claim for their lost BNB, and Binance will reimburse them for the amount that should have initially been destroyed during the automatic burn. The criteria are:

1. Lost wrapped tokens (e.g. WBNB) or pegged tokens (e.g. BTCB) and supported via the Binance “Token Canal” project.

2. Tokens transferred to verified BEP20 contract addresses on bscscan.com. These losses can then be publicly verified and prove that the funds have been permanently withdrawn from circulation.

3. Tokens lost through an honest mistake worth more than $1,000, but less than the expected amount of BNB auto-burn in the next quarter.

Tokens that would be destroyed as part of the quarterly automatic burn are then paid out to eligible applicants. Lost tokens are then counted in the quarter's burn.

How to check BNB auto-burn history?

Each burn event is publicly accessible on the blockchain and on the Binance website. You can also track burns on BNBBurn.info, a platform developed by the BNB Chain community.

To conclude

Since its launch in 2017, BNB has evolved in many ways as a utility token. The blockchain space is growing, and so is the BNB ecosystem. The new automatic BNB burn will further improve BNB's burn mechanics, improving its deflationary properties and providing more transparency to the community.