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Summary
Token burning mechanisms remove cryptocurrencies from circulation, permanently reducing the total supply. Many cryptocurrency projects conduct periodic token burnings in order to create a deflationary effect.
BNB uses two token burning mechanisms, with a long-term goal of reducing the total supply by 50%. The first is BEP-95, which destroys part of the BNB in Binance Smart Chain (BSC) as fuel. The second is the quarterly BNB destruction event.
Previously, the quarterly BNB destruction was based on BNB trading volume on the Binance trading platform. But in December 2021, Binance announced that the quarterly destruction will be replaced by a new BNB automatic destruction.
The BNB automatic destruction mechanism will automatically adjust the amount of BNB destroyed based on the BNB price in the current quarter and the number of blocks produced by Binance Smart Chain (BSC). This will increase transparency and predictability in the BNB community.
What is token burning?
Token burning refers to the process of permanently removing a cryptocurrency from circulation, thereby reducing the total supply of tokens. In other words, after the token is destroyed, it can no longer be used for transactions or other purposes.
Token burning causes the supply of tokens to exceed demand, causing a deflationary effect and potentially increasing the value of cryptocurrencies, benefiting holders. The goal of the BNB token burning event is to gradually reduce the total supply of BNB to less than 100 million.
There are many ways to destroy cryptocurrency, and some projects will perform specific destruction functions as part of the agreement. For example, BNB came with a smart contract destruction function when it was first launched.
With the rise of decentralized finance (DeFi) protocols, token burning is becoming increasingly common in the blockchain field. Ethereum (ETH) will begin destroying Ethereum base fees for all blockchain transactions after implementing the London hard fork upgrade in 2021.
In order to destroy a token, a certain amount of cryptocurrency is sent to a smart contract or wallet address that cannot be traded and does not have a private key. This means that once the tokens reach these addresses, they are permanently lost and thus completely removed from the existing supply.
To learn more about how token burning works, please read
"What is Token Burning?" 》.
How to destroy BNB?
BNB is the utility token that maintains the operation of Binance Coin and the Binance Smart Chain (BSC) ecosystem. The initial total supply of BNB is 200 million, which will be gradually reduced through token destruction. The burning activity will continue until 50% of the total supply is burned, which is reduced to less than 100 million BNB.
BNB has two destruction methods. The first is the quarterly BNB destruction event. The second is BEP-95, which destroys part of the BNB used as fuel in Binance Smart Chain (BSC).
Previously, quarterly BNB burning was based on BNB trading volume on the Binance exchange. But in December 2021, Binance announced the launch of a new BNB automatic destruction. The BNB automatic destruction mechanism will automatically adjust the amount of BNB destroyed based on the BNB price each quarter and the number of blocks produced by Binance Smart Chain (BSC). This will increase transparency and predictability in the BNB community.
BNB quarterly destruction
As of January 2022, BNB has been destroyed 17 times, with a total of The total supply reached 33,199,679, accounting for 16.59% of the total supply.
Token destruction | BNB burned quantity | BNB price (approximately) | USD value (approximately) | % of total supply |
The 1st (October 2017) | 986,000 | $1.52 | $1,500,000 | 0.49% |
The 2nd time (January 2018) | 1,821,586 | $21.96 | $40,000,000 | 0.91% |
The 3rd time (April 2018 ) | 2,220,314 | $13.52 | $30,000,000 | 1.11% |
The 4th time (July 2018) | 2,528,767 | $12.93 | $32,700,000 | 1.26% |
The 5th time (October 2018) | 1,643,986 | $10.34 | $17,000,000 | 0.82% |
The 6th time (January 2019) | 1,623,818 | $5.83 | $9,400,000 | 0.81% p> |
The 7th time (April 2019) | 829,888 | $18.79 | $15,600,000 | 0.41% |
The 8th time (July 2019) | 808,888 | $29.47 | $23,800,000 | 0.40% |
The 9th time (October 2019) | 2,061,888 | USD 17.80 | $36,700,000 | 1.03% |
The 10th time (January 2020 month) | 2,216,888 | $17.50 | $38,800,000 | 1.11% |
The 11th time (April 2020) | 3,373,988 | $15.55 | $52,466,000 | 1.69% |
The 12th time (July 2020) | 3,477,388 | $17.40 | $60,500,000 | 1.74% |
The 13th (October 2020) | 2,253,888 | $30.17 | $68,000,000 | 1.13% |
The 14th time (January 2021) | 3,619,888 | $45.80 | $165,791,000 | 1.81% |
No. 15 times (April 2021) | 1,099,888 | $541.25 | $595,314,380 | 0.55% |
The 16th (July 2021) | 1,296,728 | $303.59 | $393.673.653 | 0.65% |
The 17th time (October 2020) | 1,335,888 | $478.68 | $639,462,868 | 0.66% |
Total | 33,199,679 | - | $2,220,707,902 | 16.59% |
BNB destruction record (quarterly token destruction).
The 18th quarterly destruction in January 2022 will be the first automatic BNB destruction. A total of 1,684,387.11 BNB were withdrawn from circulation this time, of which 6296.305493 BNB were destroyed in the Pioneer Burn Program.
BEP-95 destruction mechanism
At the beginning of 2021, Binance CEO Changpeng Zhao (CZ) said that the overall destruction rate was lower than initially expected. So he shared plans to accelerate the destruction of BNB. To speed up the process, Binance introduced a new BEP-95 destruction mechanism in November 2021.
BEP-95 is a Binance improvement proposal that adds a real-time destruction mechanism to Binance Smart Chain (BSC). Binance Smart Chain (BSC) will automatically burn part of the gas fees collected by validators from each block. The more Binance Smart Chain users there are, the more BNB will be destroyed, effectively accelerating the destruction process.
As of January 2022, Binance Smart Chain (BSC) is destroying approximately 860 BNB every day, and the progress can be tracked through Twitter. BEP-95 completely relies on the Binance Smart Chain (BSC) network and will continue to destroy BNB even if it reaches the destruction target of 100 million coins.
What is BNB automatic destruction?
As mentioned above, BNB is automatically destroyed and the amount of destruction is automatically adjusted based on the price and supply and demand dynamics of BNB. That is, if the price of BNB drops, the amount of BNB burned will increase.
BNB’s automatic destruction is both objective and verifiable, aiming to improve the transparency and predictability of transactions. Unlike quarterly burning, BNB’s automatic burning has nothing to do with BNB trading volume on the Binance exchange. Instead, BNB auto-destruction uses on-chain information from Binance Smart Chain (BSC) to calculate the amount to be burned.
When the total circulating supply of BNB drops below 100 million, BNB’s automatic destruction will stop. However, the BEP-95 mechanism will continue to destroy BNB. The automatic destruction of BNB is based on the total number of blocks produced on the Binance Smart Chain (BSC) chain data and the average price of BNB to calculate the specific amount of destruction. The formula is as follows:
B represents The amount of BNB that will be destroyed. N represents the total number of blocks produced by Binance Smart Chain (BSC) this quarter. P is the average price of BNB, and K is the constant price anchor, initially set to 1,000. To learn more about how the formula works, please read this blog post.
How to check BNB automatic destruction history?
All burn events are publicly accessible via the blockchain and Binance’s official website. Through the BNBBurn.info platform built on Binance Smart Chain (BSC), destruction information can also be tracked.
Summary
Since its launch in 2017, BNB has way to develop into utility tokens. The blockchain field, including BNB and the Binance Smart Chain (BSC) ecosystem, is developing rapidly. The new BNB automatic burning will further strengthen the BNB burning mechanism, improve its deflationary characteristics, and enhance the transparency of the community.