What is BNB auto-burn and how does it work?

BNB and its role in the blockchain ecosystem

Binance Coin (BNB) is the Binance ecosystem’s native cryptocurrency. Launched in 2017, BNB was originally presented as an ERC-20 token on the Ethereum blockchain with a total supply of 200 million. In 2019, Binance started its mainnet swap and migrated all BNB tokens to BNB Chain.

BNB Chain is composed of two blockchains, both powered by BNB:

BNB Beacon Chain: Previously called Binance Chain, this blockchain handles BNB Chain governance functions such as voting and staking.

BNB Smart Chain (BSC): Once known as the Binance Smart Chain, this blockchain uses the Ethereum Virtual Machine to support smart contracts and is fully compatible with Ethereum’s tools and decentralized apps (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 applications built on the BNB Chain, such as:

PancakeSwap
Biswap
ApeSwap
Autoshark Finance
Avarice
Libera.Financial
Nominex/Nomiswap
The age of dinosaurs
DEX Finance
Open Leverage

These are just a few of the many dApps built on the BNB blockchain. Binance also remains the largest cryptocurrency exchange by trading volume and is one of the most popular exchanges in the world.

What is a coin burn?

A coin burn is when a cryptocurrency project destroys some of its coins, often to reduce the circulating supply and increase the value of the remaining coins. The coins are sent to a dead crypto wallet with an unknown private key, which means that these coins can never be spent again.

Coin burns are often conducted on a quarterly or semi-annual basis. Binance, for example, has committed to burning BNB coins every quarter until 100 million BNB are destroyed. This will leave a total supply of 100 million BNB — the maximum possible supply of BNB.

Blockchains and crypto protocols do periodic coin burns and token burns for a couple of reasons, including:

How is BNB burned?

There are coin-burning mechanisms by which BNB is burned, as explained below:

Real-time burning mechanism (BEP-95)

The first is the Binance Evolution Proposal (BEP)-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.

Binance CEO Changpeng Zhao implemented BEP-95 to accelerate BNB’s burn rate, which was going slower than planned. By burning part of the gas fees collected by each block’s validators, BEP-95 provides a constant stream of BNB to be burned.

BEP-95 is completely reliant on the BSC network, so it will continue to burn BNB after the 100 million burn goal has been reached. BEP-95 burn progress can be tracked via the BNB Burns Tracker Bot on Twitter:

Quarterly auto-burn

The second method is the scheduled quarterly burns conducted by Binance. In these burns, a specific amount of BNB is bought back from the open market and destroyed. The first burn was conducted in October 2017 and burned 986,000 BNB.

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:

What is BNB auto-burn?

BNB auto-burn was created alongside the launch and rebranding of Binance Chain and Binance Smart Chain into BNB Chain. According to Binance, the auto-burn mechanism was designed to maximize the BNB token’s value and provide a sustainable and safe long-term growth plan for the BNB ecosystem.

Binance used to do quarterly BNB burns based on the BNB trading volume on their exchange. However, quarterly burns were replaced by BNB…