What is BNB automatic combustion and how does it work?

What is BNB automatic combustion and how does it work? – Mail Bonus


BNB and its role in the blockchain ecosystem

Binance Coin (BNB) is the native cryptocurrency of the Binance ecosystem. BNB was launched in 2017 and was originally introduced as an ERC-20 token on the Ethereum blockchain with a total offering of 200 million. In 2019, Binance started an online exchange and transferred all BNB tokens to BNB Chain.

Connected: Beginner’s Guide to the BNB Chain: Developing the Binance Smart Chain

BNB Chain is composed of two block chains, both powered by BNB:

  • BNB Beacon Chain: Formerly known as Binance Chain, this blockchain handles BNB Chain management functions such as voting and betting.
  • BNB Smart Chain (BSC): Once known as Binance Smart Chain, this blockchain uses the Ethereum virtual machine to support smart contracts and is fully compatible with Ethereum tools and distributed applications (DApps).

The native Binance Coin is now an essential part of the Binance ecosystem. It is used to power the operations of the Binance and Binance.US exchanges, including other programs based on the BNB chain, such as:

  • PancakeSwap
  • Biswap
  • ApeSwap
  • Autoshark finance
  • Greed
  • Libera.Financial
  • Nominex / Nomiswap
  • Age of dinosaurs
  • DEX Finance
  • Open leverage

These are just a few of the many dApps that are based on the BNB blockchain. Binance is also still the largest cryptocurrency exchange in terms of trading volume and is one of the most popular stock exchanges in the world.

What is coin burning?

Coin burning is when a cryptocurrency project destroys some of its coins, often to reduce supply and increase the value of the remaining coins. The coins are sent in a dead cryptographic wallet with an unknown private key, which means that these coins can never be deleted again.

Coin burning often takes place quarterly or semi-annually. Binance, for example, has committed to burning BNB coins every quarter until 100 million BNBs are destroyed. This will leave a total supply of 100 million BNB – the maximum possible supply of BNB.

Connected: Buying and burning: What does it mean in cryptography?

Blockchains and cryptographic protocols cause regular currency burns and symbol burns for a number of reasons, including:

How is BNB burned?

There are coin burning systems that BNB is burned with, as explained below:

Real-time incineration equipment (BEP-95)

The first is the Binance Evolution Proposal (BEP) -95 incinerator. Through BEP-95, BNB is burned in real time by burning part of the gas charge spent in BSC. Since the 2021 BNB Smart Chain update, the BEP-95 has continued to burn around 860 BNB daily.

Binance’s CEO, Changpeng Zhao, introduced BEP-95 to speed up BNB’s slower-than-expected burning rate. By burning part of the gas fee charged by the accreditation bodies of each block, BEP-95 provides a steady stream of BNB to be burned.

BEP-95 is completely dependent on the BSC network, so it will continue to burn BNB after the 100 million combustion target has been reached. You can follow the BEP-95 burning progress through the BNB Burns Tracker Bot on Twitter:

Automatic incineration quarterly

The second method is the estimated quarter incineration carried out by Binance. In these fires, a certain amount of BNB is bought back from the free market and destroyed. The first cremation took place in October 2017 and burned 986,000 BNB.

The quarterly combustion takes place with Binance’s profit and is announced well in advance. The specific amount of BNB to be burned is based on several factors, including overall profitability, BNB’s supply distribution and the number of blocks produced per quarter. As of the last incineration in April 2022, a total of 1,839,786,261 BNBs have been incinerated:

What is BNB automatic combustion?

BNB automatic combustion was created in parallel with the introduction and rebranding of Binance Chain and Binance Smart Chain in BNB Chain. According to Binance, the automatic incinerator was designed to maximize the value of the BNB symbol and provide a sustainable and secure long-term growth plan for the BNB ecosystem.

Binance used to make a quarterly BNB fire based on the BNB trading volume on the stock exchange. However, quarterly fires were replaced by BNB automatic combustion in December 2021.

Automatic incineration is still done on a quarterly basis, but it is no longer based solely on Binance’s trading volume.

The BNB automatic combustion device is automatic to adjust the amount of BNB to be burned according to two factors:

  • BNB price
  • Number of blocks of photos at BSC in the quarter

According to Binance, the new BNB incineration systems provide better transparency and are more predictable than the previous quarterly incineration method. According to the Binance team, the new automatic combustion system will help stabilize the BNB price and protect it from high volatility.

How does BNB auto-combustion work?

From a technical point of view, BNB uses automatic chain burning information from the BNB Smart Chain to calculate how much BNB should be burned. This is how the hardware “adjusts” the amount of combustion.

The amount of combustion is also affected by the dynamics of supply and demand, which means that when the price of BNB falls, the rate of combustion increases. As mentioned before, currency burning increases the value of a cryptocurrency.

BNB automatic combustion was designed to be independent of BNB’s trading volume on Binance (which was previously the only basis for it). This is to ensure to the BNB community that the process is verifiable, objective and transparent.

The goal is to continue to run automatic combustion up to the 100 million mark. It will do it automatically using the formula below:

In the equation above, B represents the total amount of BNB to be burned and N represents the number of bricks produced on the BNB Smart Chain during the quarter. The average block time is 3 seconds and sets the estimated value of blocks produced per hour on 1,200 blocks. A standard calculation would give a value of N which is approximately 2,592,000 blocks. The value can fluctuate depending on exactly how many days are in a month in a given quarter.

P is for the average price of BNB at that time. The average price fluctuates between 10% and 20% per day and the median is determined by taking a sample based on an authorized oracle provider, such as ChainLink, for BSC. This is usually done in 10,000 blocks and takes about 8.3 hours to produce.

K is initially set to 1000 and is a fixed price anchor. Its value is subject to change and depends largely on the BNB Smart Chain community. Members can submit a BEP proposal as well as vote for the community to update this value.

BNB quarter combustion

The previous quarterly incineration system was upgraded to quarterly automatic incineration. Automatic incineration achieves the same goal but is more efficient and transparent. The chart below shows the expected quarterly BNB automatic combustion amount for a variety of BNB average prices:

How to check BNB auto burn history?

BNB automatic combustion history can be tracked. The website keeps a record of all previous fires, including information about each fire:

For example, if we click on the latest burn, Burn # 19, we may see the following information:

So, how much BNB has been burned so far? To date, the total BNB has burned 35,750,684.88. Based on current price information, this equates to $ 7,866,304,917.03. You can also keep track of real-time values ​​and information on BNB incineration events.

When is the next BNB burning?

The most recent BNB fire occurred on April 19, 2022, destroying 1,830,382 BNBs, or $ 772,363,806, through automatic combustion. There is no specific date yet for the 20th fire, but it is expected to occur at any time between the 16th and 20th. July 2022.

Binance CEO Changpeng Zhao usually announces BNB incineration dates on Twitter, so it’s worth keeping an eye out for updates on the next auto-incineration.