Binance has introduced a new auto burn mechanism for BNB to replace its current quarterly burn method.
The exchange said its implementation will help "provide greater transparency and predictability to the BNB Community."
The new auto burn mechanism of Binance will emphasise BSC activity on the blockchain. It will depend both on the price of BNB and the amount of BSC activity conducted on the network.
What Is Binance's New Auto Burn Mechanism All About?
As per the official announcement, Binance's decision to implement a new auto burn mechanism is inspired by the constant community's appeals to transform the blockchain ecosystem and make it more robust in terms of blockchain infrastructure. Binance said:
We’ve been listening closely to the Binance Smart Chain (“BSC”) and BNB communities-and we are proud to announce the implementation of a new BNB Auto-Burn procedure effective immediately.
Previously, the total BNB burnt depended on Binance's own profits.
One of the key changes also includes increased transparency and predictability of transactions that will help the community conduct faster and cheaper transactions on the network.
"BNB Auto-Burn will be both objective and verifiable, independent of revenues generated on the Binance CEX through the use of BNB, and will be automatically adjusting in that the burn amount will be based on the price of BNB," Binance said. This will "reflect the supply and demand for BNB, as well as the number of blocks produced during a quarter."
Binance also shared the full algorithm it will use to burn BNB. The total burned will be as follows:
(No. of BSC blocks x 1000)/(Average BNB Price + Constant Price Anchor )
In the upcoming auto-burn, WuBlockchain expects Binance to burn 1.69m BNB, based on current data.
Until now, BNB has deployed two burn mechanisms. The quarterly burn is a Binance staple, with the latest burn destroying 1,335,888 BNB. Second, the BEP-95 upgrade implemented a real-time burning mechanism that burns a portion of the gas fee spent on BSC transactions. This has destroyed some 18,600 BNB, worth $10.5m.
As was the case with the previous quarterly burn system, the burning will stop when BNB's circulation drops below 100,000,000.
[Image: Vadim Artyukhin/Unsplash]