What Is BNB Auto-Burn?

What Is BNB Auto-Burn?

Beginner
แƒ’แƒแƒ›แƒแƒฅแƒ•แƒ”แƒงแƒœแƒ”แƒ‘แƒฃแƒšแƒ˜ Jan 12, 2022แƒ’แƒแƒœแƒแƒฎแƒšแƒ”แƒ‘แƒฃแƒšแƒ˜ Jun 9, 2023
12m

TL;DR

Coin burning is a mechanism used to remove coins from circulation, reducing the total supply permanently. Many cryptocurrency projects perform periodic coin burns to create a deflationary effect.

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

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

The BNB Auto-Burn mechanism will automatically adjust the amount of BNB to be burned based on the BNB price and the number of blocks generated on the BNB Chain during the quarter. This offers greater transparency and predictability to the BNB community. Users who have lost tokens in certain cases can count these towards the burn and then be reimbursed under the BNB Pioneer Program.

What Is a Coin Burn?

A coin burn refers to the process of permanently removing cryptocurrencies from circulation to reduce the total supply of the coin. In other words, coins are destroyed and can no longer be used in trading or anything else.ย 

By making the coin scarcer, coin burning aims to create a deflationary effect and potentially increases the cryptoโ€™s valuation to benefit its holders. For BNB, the goal of coin-burning events is to gradually reduce its total supply until itโ€™s under 100 million BNB.

While there are multiple ways to burn cryptocurrency, some projects implement a specific burning feature as part of their protocol. For example, BNB included a smart contract burning function when it was first launched.

With the rise of Decentralized Finance (DeFi) protocols, coin burning has become more common in the blockchain space. Ethereum (ETH) started burning the ETH base fee of all blockchain transactions after implementing the London hard fork upgrade in 2021.

To burn coins, a certain amount of crypto is sent to a smart contract or wallet address that cannot be used for making transactions and has no private keys. This means that once the coins reach the address, they will be lost forever and thus removed from the available supply.

For more details on how a coin burn works, check out What Is a Coin Burn?.

How Is BNB Burned?

BNB is the utility token that powers the BNB ecosystem. The initial total supply was 200,000,000 BNB, but it is gradually decreasing through coin burns. The burning events will happen until 50% of the total supply is destroyed, reducing it to under 100,000,000 BNB.ย 

There are two methods to burn BNB. The first consists of quarterly BNB burning events. The second was introduced in the BEP-95 and involves burning a portion of the BNB spent as gas fees on the BNB Chain.

Previously, the quarterly BNB burns were based on the BNB trading volume on the Binance exchange. But in December 2021, Binance announced the new BNB Auto-Burn. The BNB Auto-Burn mechanism automatically adjusts the amount of BNB to be burned based on the BNB price and the number of blocks generated on the BNB Chain during each quarter. This offers greater transparency and predictability to the BNB community.

BNB Quarterly Burn

As of April 2023, Binance completed 23 BNB coin burn events. In total, 44,833,226.65 BNB coins were burned, reducing the initial 200M supply by approximately 22.37%.

Coin Burn

BNB Burned

Approx. BNB Price

Approx. USD Value

% of Max Supply

$1.52

$1,500,000

0.49%

$21.96

$40,000,000

0.91%

$13.52

$30,000,000

1.11%

$12.93

$32,700,000

1.26%

$10.34

$17,000,000

0.82%

$5.83

$9,400,000

0.81%

$18.79

$15,600,000

0.41%

$29.47

$23,800,000

0.40%

$17.80

$36,700,000

1.03%

$17.50

$38,800,000

1.11%

$15.55

$52,466,000

1.69%

$17.40

$60,500,000

1.74%

$30.17

$68,000,000

1.13%

$45.80

$165,791,000

1.81%

$541.25

$595,314,380

0.55%

$303.59

$393,673,653

0.65%

$478.68

$639,462,868

0.66%

$474

$798,399,490

0.84%

$403.22

$741,840,738

0.91%

$226.89

$444,632,106

0.97%

$278.33

$574,800,583

1.03%

$278.74

$575,458,677

1.03%

$306.82

$676,744,304

1.01%

TOTAL

44,833,226.65

-

$6,032,583,800

22.37%

BNB Destruction History (quarterly coin burn).

In quarter #18 (Jan 2022), BNB completed its first quarterly BNB Auto-Burn. A total of 1,684,387.11 BNB was removed from circulation, including 6,296.305493 BNB burned in the Pioneer Burn Program.

The BEP-95 Burning Mechanism

In early 2021, Binance CEO CZ shared his plan to accelerate BNB burns as the overall burning rate was slower than he originally anticipated. To speed up the process, Binance introduced a new burning mechanism through the BEP-95 in November 2021.

BEP-95 is a Binance Evolution Proposal that adds a real-time burning mechanism to the BNB Chain. The smart contract automatically burns a portion of the gas fees collected by validators from each block. As more people use the BNB Chain, more BNB will be burned, effectively accelerating the burning process.

As of July 2022, the BNB Chain burns approximately 285 BNB every day, and the progress can be tracked on Twitter. As BEP-95 is solely dependent on the BNB Chain network, it will continue to burn BNB even after the 100 million burn target has been reached.ย 

What Is BNB Auto-Burn?

As mentioned, BNB Auto-Burn will automatically adjust the burn amount based on BNBโ€™s price and supply-demand dynamics. This means that if the BNB price drops, the amount of BNB burned will increase.

BNB Auto-Burn is both objective and verifiable. It aims to provide greater transaction transparency and predictability. Unlike the Quarterly Burn, BNB Auto-Burn is independent of the BNB trading volume on the Binance exchange. Instead, it uses on-chain information to calculate the amount to burn.

Once the total circulating supply of BNB falls below 100 million, the BNB Auto-Burn will stop. However, the BEP-95 mechanism will continue to burn BNB. BNB Auto-Burn follows a formula to burn BNB automatically, which is based on the on-chain data of total blocks generated and the average price of BNB:

B represents the BNB to be burned. N is the total number of blocks produced during the quarter. P is the average BNB price, and K is a constant price anchor (initially set at 1000). For more details on how this formula works, you can take a look at this blog article.ย 

What Is the Bnb Pioneer Burn Program?

In 2020, Binance introduced the BNB Pioneer Burn Program to help users who have lost their BNB funds by accident. Users who meet certain criteria can put in a claim for their lost BNB, and Binance will reimburse them from the amount that is to be auto-burned. The criteria include:

1. Tokens lost that were wrapped (e.g., WBNB) or pegged tokens (e.g., BTCB) and supported via the Binance โ€œToken Canalโ€ Project.

2. Tokens transferred to verified BEP20 contract addresses verified on bscscan.com. These losses can then be publicly verified as moving the asset permanently out of circulation.

3. Tokens lost by an honest mistake worth more than 1,000 USD, but less than the projected BNB Auto-Burn amount in the upcoming quarter.

Tokens that would be burned in the quarterly Auto-Burn are then given to eligible applicants. The lost tokens are then counted towards that quarterโ€™s burn.

How to Check the BNB Auto-Burn History?

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

Closing Thoughts

Since its launch in 2017, BNB has evolved in many ways as a utility token. The blockchain space is growing fast, and so is the BNB ecosystem. The new BNB Auto-Burn will further enhance the BNB burning mechanisms, improving its deflationary properties and bringing more transparency to the community.

Further Reading

Disclaimer and Risk Warning: This content is presented to you on an โ€œas isโ€ basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

แƒžแƒแƒกแƒขแƒ”แƒ‘แƒ˜แƒก แƒ’แƒแƒ–แƒ˜แƒแƒ แƒ”แƒ‘แƒ
แƒ“แƒแƒ™แƒแƒ•แƒจแƒ˜แƒ แƒ”แƒ‘แƒฃแƒšแƒ˜ แƒกแƒขแƒแƒขแƒ˜แƒ”แƒ‘แƒ˜
Proof of Burn Explained
What Is Margin Trading?
The 2008 Financial Crisis Explained
แƒ“แƒแƒแƒ แƒ”แƒ’แƒ˜แƒกแƒขแƒ แƒ˜แƒ แƒ”แƒ— แƒแƒœแƒ’แƒแƒ แƒ˜แƒจแƒ˜
แƒ—แƒฅแƒ•แƒ”แƒœแƒ˜ แƒชแƒแƒ“แƒœแƒ˜แƒก แƒžแƒ แƒแƒฅแƒขแƒ˜แƒ™แƒแƒจแƒ˜ แƒ’แƒแƒ›แƒแƒกแƒแƒงแƒ”แƒœแƒ”แƒ‘แƒšแƒแƒ“ แƒ’แƒแƒฎแƒกแƒ”แƒœแƒ˜แƒ— Binance-แƒ˜แƒก แƒแƒœแƒ’แƒแƒ แƒ˜แƒจแƒ˜ แƒ“แƒฆแƒ”แƒกแƒ•แƒ”.