Update 04/19/2022: The title of this article has been updated to correct the amount of BNB burned.
The BNB Smart Chain network, formerly known as Binance Smart Chain, had its first quarterly token burn of 2022 and exceeded the figures recorded in each of the quarters of 2021. The total burn was 1,839,786 BNB (BNB), the largest removal of tokens from this network since December 2020.
This BNB Chain token burn, which can be seen in the transaction registered on the blockchain, equals more than USD 770 million, according to the current price of the cryptoactive (USD 418.9) according to CoinMarketCap.
As can be seen in the graph below, it is the Highest amount of tokens burned on the BNB Chain for 16 months. For the next quarter, meanwhile, the site bnbburn.info estimates a burn of 1,812,186 BNB, with an average value of USD 424 for each unit of the cryptocurrency.
During 2020, the burning of BNB tokens exceeded 3 million units in three of the four periods of the year. At that time, the trading volume of the BNB token on Binance was high, and this was the main metric that determined the volume of burns.
In addition, at that time the Binance network experienced a gradual growth in its use, and even began to “overshadow” Ethereum in the field of decentralized finance (DeFi) in 2021, as we can see below.
BNB is the native token of the BNB Chain network and is used to pay commissions for the transactions that are made. Beyond its application within the ecosystem, it can also be traded on exchanges like any other cryptocurrency.
Why does BNB Chain burn its tokens?
Changpeng Zhao, CEO of Binance, asked himself this very question in a publication On twitter. His answer was simple: “Because it is in the white paper. It’s a compromise”. On the Binance Blog it is explained what the purpose is to generate a deflationary model by reducing the number of tokens in circulation.
The BNB Chain network has automatically established a token burn every quarter to reduce the circulation of the cryptocurrency, the fourth in market capitalization with USD 69,418 million. A) Yes, it is intended to go from a circulating of 165 million to 100 million. As of today, more than 35.5 million BNB has already been burned.
And what does the amount of BNB that is burned depend on? Previously, this was done based on BNB trading volume on the Binance exchange. However, from December 2021 this mechanism changed to offer “greater predictability and transparency”, as expressed in his blog post cited above.
As explained on the site bnbburn.info, this token removal is based on the price of the crypto asset and the number of blocks that are produced throughout the quarter. In other words, the burning is directly related to the use that is given to the network and its token.
In addition to the quarterly burn, the BNB Chain has a block burn system. This arose from the proposal to improve the BEP-95 network, reported in October 2021 by CriptoNoticias.
In this way, with each block that is confirmed on the chain, 10% of the commissions paid to validators are burned. According to data from bnbburn.info, 72,442 BNB have been burned with this system at the time of writing this article.