Last quarter, Binance, the world’s largest cryptocurrency exchange by volume, announced the first-ever Binance token (BNB) auto-burn program, removing 1,684,387.11 BNB tokens worth $783 million from circulation.
The number of tokens to be burned under the new program is calculated using a formula based on the total number of blocks produced on the Binance Smart Chain, a blockchain with smart contract functionality that runs alongside Binance Chain, and BNB’s average dollar-denominated price over the quarter.
When cryptocurrency tokens or coins are purposefully and permanently removed from circulation, they are referred to as “burned.” The development team behind a cryptocurrency asset is usually in charge of token burning.
It can be done in a number of methods, the most frequent of which is to send the coins to a so-called “eater address,” which has its current balance publicly viewable on the blockchain but no access to its contents.
Burning may entail the project’s developers purchasing tokens from the market or burning a portion of the supply currently accessible to them.
Burning can be done for a variety of reasons, but it is most commonly utilized for deflationary purposes: a drop in the circulating supply causes an asset’s price to rise, enticing traders and investors to participate. Another significant use case for token burning is to keep stablecoin prices pegged (cryptocurrencies whose value corresponds to another asset, like the U.S. dollar).
Binance has pledged to remove 100 million BNB, or half of the total supply, from circulation through a procedure known as burning, since BNB and Binance started in 2017. The number of tokens removed during this quarter was automatically determined using the Auto-Burn methodology, unlike previous quarterly burns.
BNB burns in the past reflected token usage and revenue made on the Binance centralized exchange. The BNB Auto-Burn effectively substitutes the old burn mechanism in favor of a more objective procedure outside of the Binance centralized ecosystem as a consequence of community feedback. Binance noted in the statement that BNB will continue to burn a portion of the Binance Smart Chain (BSC) gas fees in real-time.
“BNB is deflationary,” tweeted Binance CEO Changpeng Zhao, who just received a valuation of $96 billion according to Bloomberg’s Billionaire Index. As of this writing, the BNB coin is trading at $465, down 3.38 percent. He added that:
“The implementation of the BNB Auto-Burn is a natural next step in BNB’s journey and will help the BNB community grow through providing greater autonomy, transparency and predictability.”
30 May 2023
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