This is the plan to burn more BNB, Binance’s cryptocurrency

This is the plan to burn more BNB, Binance's cryptocurrency

Key facts:
  • The proposal bears some similarity to EIP-1559, which was activated on Ethereum.

  • The price of BNB is expected to increase due to the further reduction in its working capital.

Following in the footsteps of Ethereum, which recently introduced a fee-burning system with EIP-1559, Binance Smart Chain developers want to add something similar to that blockchain.

This is Binance Evolution Protocol (BEP) number 95. This proposal consists of a BNB burning mechanism, native cryptocurrency of this network. If he BEP-95 is approved, part of the fees that are paid (10%, according to the proposal), instead of going to the validators, they will be destroyed, which will lead to a reduction in the cryptocurrency’s circulating.

Currently, BNB burning is already done on a quarterly basis and the number of coins destroyed is related to the fees paid on the centralized exchange Binance. CriptoNoticias has reported some of these burns that, at times, exceeded the equivalent of USD 500 million.

The goal in destroying BNB and reducing your currency is increase asset scarcity. In a context of increasing demand, if the supply is reduced, the price should increase.

“While the implementation of this BEP could decrease the total amount of BNB that validators and delegators receive for staking, the fiat denominated value of their rewards can bet,” explains Binance in its Blog official. “This burning mechanism would further reduce the supply of BNB; therefore, increased demand would raise the value of BNB, “they add.

A recent example of how this works is what happened days ago with UBI, a basic income token on Ethereum. The burning of 8% of its currency by the creator of Ethereum, Vitalik Buterin, produced a price increase that exceeded 3,000% in less than an hour.

Regarding BNB, the CoinMarketCap website shows that, at the time of writing, its currency is 166,801,148 units. The Binance exchange commission burnouts will occur until just 100,000 BNB remain. With the BEP-95, these burns would continue and, thus, the reduction of your working capital would continue in progress.

It is worth clarifying that, although the BEP-95 bears some similarity with the EIP-1559 of Ethereum, they are not the same. The Ethereum proposal added a miner tip payment system, which will not exist on the Binance Smart Chain.

How is a proposal voted on the Binance Smart Chain?

For the BEP-95 to be approved, it must pass a voting process that is based on the power of the validators. This power is determined by how many BNB they have staked.

The BSCscan website shows that at the time of publication of this article, the Binance Smart Chain has 44 validators, of which only 21 are active. Those with the highest voting power are Namelix, BSCscan and Ciscox.

This is the plan to burn more BNB, Binance's cryptocurrency
Namelix, BSCScan and Ciscox are the Binance Smart Chain validators with the highest voting power. Source: BSCscan.com.

For now, BEP-95 is in what is called the “draft” phase. You must receive a minimum initial deposit of 2,000 BNB (which is then returned to voters) for voting to be enabled.

In voting, validators must choose between ‘yes’ or ‘no’. The answer that exceeds 50% of the voting power will determine what is done with this proposal: if it is approved or rejected.

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