Binance Smart Chain proposes to introduce fee-burning mechanism similar to Ethereum

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Binance Smart Chain proposes to introduce fee-burning mechanism similar to Ethereum By Hannah perez

The Binance blockchain could see a fee-burning mechanism similar to the one Ethereum introduced with EIP-1559. Proposal BEP-95 is awaiting a vote.

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Binance Smart Chain (BSC), the blockchain of the largest cryptocurrency exchange, Binance, could soon operate using a token burning mechanism similar to the one just introduced on the network Ethereum.

The proposed BEP-95 update, which was introduced in the Github BSC audience this week, suggests the adoption of a regular rate burning mechanism, somewhat similar to that implemented through EIP-1559 of Ethereum. The main objective of the mechanism would be to speed up the burning process and make the token native Binance Coin (BNB) is more valuable.

It should be noted that the notion of “burning” in this context refers to the process of permanently eliminating a token crypto from circulation, thus reducing its supply and potentially increasing its price. The process is usually carried out by sending the coins to an address that is not accessible to anyone, thus being destroyed.

Automatic rate burning for BSC

The new BSC update includes two mechanisms that would impact the network: the burning of the fixed rate that is currently distributed to validators and a manageable burn rate. Proponents of the proposal also claim that it could make BSC more decentralized.

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As such, the Proposal BEP-95 suggests burning a part of the transaction fees in each block and that the proportion of burning can be adjusted through the governance system of the network. The result would be that the validators would receive less transaction fees, since the validators would instead tokens they would be destroyed. Over time, this would help reduce the total supply of BNB, which could eventually lead to a price increase.

Since the BSC network has no rewards for miners like Bitcoin and Ethereum, the transaction fee is distributed among the validators. In the BSC blockchain, the fee is charged on each validated block and then distributed between two smart contracts.

The proposal suggests that the portion of the burned tariffs be initially set at 10%. Currently, the network sees around 6,814 BNB (or close to USD $ 3.4 million) in transaction fees per day, so a burn of that amount would reduce supply to 681 BNB per day, around USD $ 334,000 according to current prices.

Binance Smart Chain it is already subject to regular burning processes. When Binance launched BNB in ​​2017, pledged to burn a total of 100 million tokens, that is, 50% of its total supply. The company burns large amounts of BNB each quarter based on the exchange’s trade fee ratio. The most recent burning destroyed 1,335,888 BNB, or nearly $ 660 million.

Proposals BEP-95 and EIP-1559 are not identical

Currently, the proposal is in the draft stage and is awaiting a vote for its implementation. For the voting process to take place, the proposal must receive a minimum deposit of 2,000 BNB. If this happens, the network validators can vote for or against the changes to move forward. If approved, the change will be implemented immediately.

At the time of editing, the proposal only has two comments on GitHub, one against and one in favor. “Doesn’t seem like a good propositionThe first comment that opposes the plan reads. That answer argues that the destruction “endless”Of BNB could corrupt the economy of the token because people will rather hold BNB long term than use it within the ecosystem.

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It is worth noting that BSC’s proposal, although it may resemble that of Ethereum, it is not entirely identical to EIP-1559. This last added a burn fee to every network transaction Ethereum, one that increases or decreases according to demand. Typically, the total amount of fees burned has been less than the new amount of ETH coins issued per block, which means that the amount of inflation has been reduced by EthereumBut it has not made its economy deflationary.

The difference with the BSC proposal is that there is currently no inflation in the network. So instead of reducing inflation, it will make the network deflationary from the start. As the opposing user pointed out, this could be advantageous in terms of an asset designed to safeguard value, but not so much for one with practical uses.

BNB is widely used within the vast ecosystem of Binance. From for the payment of transaction fees in BSC-based decentralized finance (DeFi) applications, to discounts and special services offered by the exchange centralized Binance.


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Sources: The Block, U.Today, file

Hannah Estefanía Pérez’s version / DailyBitcoin

Image from Unsplash

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