The Binance Smart Chain has activated a real-time BNB burn mechanism based on the BEP95 proposal. A fixed portion of gas charges will be burned in each unit automatically.
The launch of the new mechanism was
announced back in October. BEP95 was created to speed up the process of burning BNB and further decentralize Binance. In addition, this could lead to an increase in the price of BNB due to the increasing deficit.
“While the BEP95 mechanism may reduce the total amount of BNB that validators receive from staking, the nominal value of rewards may increase. This mechanism will shorten the supply; thus, an increase in demand will lead to an increase in the value of BNB, ”the official statement said.
Prior to this, the incineration process was carried out manually every three months. The incineration was intended to reduce the total BNB supply by 50%, from 200 million to 100 million tokens. The latest quarterly burning to date took place shortly before the BEP-95 was announced, burning 1.3 million BNB, and the cost of the burnt coins hit a record – almost $ 640 million.Now, the process will continue to work even after the planned 100 million BNB is burned.
Binance’s new mechanism is similar to but not identical to the Ethereum burn algorithm. Although both chains collect coins for burning through transaction fees, a portion of the BSC fees are still used to compensate validators. In Ethereum, all mandatory fees are sent to the burn pool. At the same time, the “tip” option is available for the participants in the transactions to compensate the miners. Users receive the rest in the form of block rewards.
Due to the fact that Binance uses a modified Proof-of-Stake algorithm, new coins do not enter circulation in order to counterbalance burning. In Ethereum, block reward and burn pool work against each other, influencing the supply. This sometimes leads to a net deflationary period for Ethereum.