Carefully! Lots of text.

Coin burning is the process of removing coins from circulation, reducing the overall supply. Many cryptocurrency projects periodically burn coins to create a deflationary effect.

BNB uses two coin burn mechanisms that will reduce the total supply by 50% in the long term. The first mechanism burns a portion of the BNB spent on gas fees on the Binance Smart Chain, or BSC (the mechanism introduced in BEP-95). The second consists of quarterly BNB burns.

Previously, quarterly BNB burns were calculated based on the BNB trading volume on the Binance exchange. But in December 2021, Binance announced that the quarterly burn would be replaced with a new automatic BNB burn mechanism.

The automatic burning mechanism adjusts the amount of BNB depending on the price and the number of blocks created on the BSC during the quarter. It provides more transparency and predictability to the BNB community.

What is coin burning

Coin burning is the process of permanently removing coins from circulation, reducing the total supply. In this case, the coins are destroyed and can no longer be used in trade or anywhere else.

Burning coins makes them more scarce and creates a deflationary effect, increasing the value of the cryptocurrency. Thus, the total supply of BNB will gradually decrease until it falls below 100 million.

There are several ways to burn cryptocurrency, with some projects adding a burning mechanism to their protocol. For example, when BNB was first launched, the burning function was performed by smart contracts.

With the rise in popularity of decentralized finance (DeFi) protocols, coin burning has become more common in the blockchain space. Thus, Ethereum (ETH) began to burn the base ETH commission for all blockchain transactions after the London hard fork in 2021.

When burning coins, a certain amount of cryptocurrency is sent to a smart contract or wallet address that cannot be used for transactions and does not have private keys. This means that once the coins reach their destination, they are lost forever and removed from circulation.

For detailed information about the coin burning mechanism, read the article

What is coin burning?

How does burning BNB work?

BNB is a utility token of the BNB and BSC ecosystems. Its initial total supply was 200,000,000 BNB and is gradually decreasing through coin burning. Burns will continue until 50% of the total supply has been withdrawn, reducing it to less than 100,000,000 BNB.

There are two ways to burn BNB. The first is quarterly BNB burns. The second was introduced in BEP-95 and involves burning a portion of the BNB spent on gas fees on the Binance Smart Chain (BSC).

Previously, quarterly BNB burns were calculated based on the BNB trading volume on the Binance exchange. But in December 2021, Binance announced a new automatic burning mechanism that adjusts the supply of BNB based on the price and number of blocks produced on BSC during the quarter. It provides more transparency and predictability to the BNB community.

Quarterly BNB Burn

As of January 2022, Binance has completed 17 BNB burns. In total, the mechanism burned 33,199,679 BNB, which is 16.59% of the total supply.

BNB burn timeline (quarterly coin burns).

In Q18 (January 2022), the first quarterly automatic burning of BNB took place. A total of 1,684,387.11 BNB were withdrawn from circulation, including 6296.305493 BNB burned as part of the Pioneer Burn program.

Combustion mechanism BEP-95

At the beginning of 2021, Binance CEO Changpeng Zhao (CZ) shared his intention to accelerate the burn of BNB as the overall burn rate was lower than expected. To achieve this, in November 2021, Binance introduced a new burning mechanism through BEP-95.

BEP-95 is a Binance Evolution Proposal that adds a real-time burning mechanism to Binance Smart Chain (BSC). BSC automatically burns a portion of the gas fees collected by validators on each block. Moreover, the more people use Binance Smart Chain, the more BNB will be burned, significantly speeding up the burning process.

As of January 2022, BSC is burning approximately 860 BNB every day, posting progress on Twitter. Since BEP-95 relies solely on the BSC network, it will continue to reduce the amount of cryptocurrency after reaching the goal of 100 million BNB.

What is the automatic burning mechanism of BNB

The automatic burn mechanism adjusts the burn amount based on the BNB price and demand dynamics. This means that if the price of BNB falls, the amount of BNB burned will increase.

Automatic BNB burning is an objective and verifiable mechanism that increases transparency and predictability of transactions. Unlike quarterly burns, it does not depend on trading volume on the Binance exchange, but is adjusted based on on-chain data.

It is planned that the automatic burning of BNB will be stopped when the total number of BNB in ​​circulation is below 100 million. However, the developers propose using the BEP-95 mechanism even after achieving the goal. Automatic burning uses a formula based on BSC on-chain data on the total number of blocks generated and the average price of BNB:

B is the amount of BNB to burn. N is the total number of blocks created on the BSC network during the calendar quarter. P is the average price of BNB, and K is a constant price anchor value (initially 1000). You can find out more about the formula in our blog article.

How to Check BNB Auto Burn History

Each burn is publicly available on the blockchain and on the Binance website. Burns can also be tracked on BNBBurn.info, a platform created by the BSC community.

Summary

Since its launch in 2017, BNB has been actively developing as a utility token in the BNB and BSC ecosystem. The new automatic burning mechanism is designed to optimize the way BNB is burned, improving its deflationary properties and increasing the transparency of transactions in the community.