Unraveling BNB’s Auto-Burn: Understanding Its Mechanisms and Impacts

Understanding the BNB Auto-Burn Mechanism

The BNB Auto-Burn system is designed to reduce the total supply of Binance’s BNB tokens to a specific range. This is achieved through two burning mechanisms: real-time burning via the BEP-95 protocol and quarterly auto-burn events.

BEP-95: Real-Time Coin Burning

BEP-95 is a BNB burning mechanism that continuously burns a portion of the BNB used as gas fees on the BNB Smart Chain (BSC). Introduced in 2021, BEP-95 accelerates the BNB burning process, adjusting the supply and demand dynamics to maintain balance.

Binance CEO Changpeng Zhao introduced BEP-95 to speed up BNB burns, especially when they fell behind schedule. Since then, BEP-95 has been burning approximately 860 BNB daily, contributing to the goal of removing 100 million BNB from circulation.

Quarterly Auto-Burn: Scheduled Coin Burning Events

In addition to real-time burning, Binance conducts quarterly auto-burn events. These scheduled burns remove a certain amount of BNB from circulation. The first quarterly burn occurred in October 2017, removing 986,000 BNB from circulation.

The quantity of BNB burned during these events depends on factors like Binance’s profitability, the number of blocks generated on the BSC, and the prevailing BNB price. This consistent reduction in supply contributes to BNB’s deflationary nature.

How Does BNB Auto-Burn Work?

BNB Auto-Burn calculates the amount of BNB to be burned using a formula that considers on-chain data and market conditions. The formula is as follows:

• B = N * P * K

In this formula:

• B represents the total amount of BNB to be burned.
• N is the total number of blocks produced in a quarter on the BNB Smart Chain.
• P denotes the average price of BNB during that quarter.
• K is a constant anchoring price, initially set at 1000.

The auto-burn mechanism is independent of Binance’s trading volume, focusing on on-chain data to ensure transparency and objectivity. The process continues until the BNB supply is reduced to 100 million.

Viewing the BNB Auto-Burn History

As of now, over 50,302,027.74 BNB have been burned, amounting to a total value of $11,795,484.75. The most recent quarterly burn (Q3 2023) removed 2,139,182.98 BNB, valued at $501,617,017.54. Future burn events are announced by Binance CEO Changpeng Zhao on Twitter.

To stay updated, follow Binance’s official channels and Changpeng Zhao’s Twitter feed for announcements on upcoming auto-burn events and other related news.

Conclusion

The BNB Auto-Burn system is a unique mechanism designed to reduce the total supply of BNB while enhancing transparency and value appreciation. With BEP-95 real-time burning and quarterly auto-burn events, Binance has created a transparent and community-driven process contributing to the long-term sustainability of the BNB ecosystem.

The path to 100 million BNB remains formula-driven and flexible, ensuring adaptability to changing market conditions. This approach builds long-term trust among the BNB community and strengthens the value of the Binance ecosystem. Keep an eye on Changpeng Zhao’s Twitter feed for updates on upcoming burn events and further developments in the BNB auto-burn system.