You surely have heard about the process of burning coins, but do you know how it works? Here is a brief introduction to Binance's BNB auto-burn system.
There are coin-burning mechanisms by which BNB is burned, as explained below:The first is the Binance Evolution Proposal -95 burning mechanism. Through BEP-95, BNB is burned in real-time by burning a portion of the gas fees spent on BSC. Since the 2021 upgrade of the BNB Smart Chain, BEP-95 has continued to burn around 860 BNB daily.
The quarterly burns are conducted using Binance’s profits and are announced well in advance. The specific amount of BNB to be burned is based on several factors including overall profitability, BNB circulating supply and the number of blocks produced per quarter. As of the most recent burn in April 2022, a total of 1,839,786.261 BNB have been burned:BNB auto-burn was created alongside the launch and rebranding of Binance Chain and Binance Smart Chain into BNB Chain.
The BNB auto-burn mechanism is automated to adjust the quantity of BNB that will need to be burned depending on two factors:According to Binance, the new BNB burning mechanisms provide better transparency and are more predictable than the previous quarterly burn method. According to the Binance team, the new auto-burn mechanism will help stabilize the BNB price and protect it from large fluctuations.
In the equation above, B represents the total amount of BNB to be burned and N represents the number of blocks produced on the BNB Smart Chain during the quarter. The average block time is 3 seconds, setting the approximate value of blocks produced per hour at 1,200 blocks. A standard computation would yield the value of N as approximately 2,592,000 blocks. The value may fluctuate depending on exactly how many days there are per month during a specific quarter.