Binance BNB Burn Explained: How Much is Burnt and When?

Many projects introduce a deflationary mechanism in their tokenomics. For a large part, this is usually done through a so-called token burn. Binance is undoubtedly the most famous industry participant in removing chunks of its native cryptocurrency (Binance Coin – BNB), and the way they do it has changed throughout the five years of its existence.

So far, the exchange has burned billions of dollars worth of BNB, pursuing its goal of reducing the token’s total supply by 50%. In this article, we examine how the process works, how many burns have been made so far, when the next one will occur, and so forth.

What Is a Coin Burn?

The ‘burning’ of a coin is essentially removing it from circulation by sending it to specifically designated addresses that can only receive cryptocurrency. These addresses are referred to as “burners” or “eaters.”

In traditional finance, the closest thing to a coin burn is when a company buys back its own stock from the market in an attempt to reduce the circulating supply and essentially increase the value of the outstanding stock. However, the main difference is that the bought-back stock remains in existence and in the company’s ownership, whereas the coins that are burned are essentially destroyed since nobody can ever access them again.

Some notable projects that have introduced burning mechanisms include Shiba Inu (implemented in April this year), Ethereum (started with the EIP-1559 in 2021), and multiple algorithmic stablecoins.

BNB’s Role and How It Started

BNB is the native cryptocurrency of the world’s largest crypto exchange and the primary token used in Binance’s entire ecosystem – this includes the BNB Beacon Chain (previously known as Binance Chain) and the BNB Smart Chain (formerly – Binance Smart Chain).

Released in 2017 alongside the exchange, BNB functioned as an ERC-20 token on the Ethereum network before Binance ultimately transitioned it to the BNB chain two years later.

The whitepaper explained that, initially, there was a “strict limit of 200 million BNB” – a number “never to be increased.” Nevertheless, the company laid out the foundations of the burning mechanism in the paper, saying:

“Every quarter, we will use 20% of our profits to buy back BNB and destroy them until we buy 50% of all the BNB (100MM) back. All buy-back transactions will be announced on the blockchain. We eventually will destroy 100MM BNB, leaving 100 BNB remaining.”

BNB Quarterly Auto-Burn

Upon the launch of Binance, the team introduced the original quarterly burning mechanism based on the BNB trading volume and the fees Binance generated from it. However, arguing that it lacks sufficient transparency and predictability, the company switched it to a quarterly auto-burn process.

The new method, incorporated in December 2021, allows on-chain automatic calculations to determine how much of the token has to be burned based on its price and the number of blocks generated on the BNB chain during that quarter. Essentially, if BNB’s price drops, the amount of burned tokens will increase to remain within the supply-demand dynamics.

Binance promises that the quarterly auto-burn is “both objective and verifiable, independent of revenues generated on the Binance CEX through the use of BNB.” The latest Burn was in April 2024.

BEP-95 and Burning BNB Through BNB Chain

While placing a target of 100 million tokens to be burned and the total supply of BNB to be capped at the same number of coins was the initial idea, which has not changed, Binance had to implement several changes along the way to adjust. More specifically, the company outlined new processes (aside from the aforementioned auto-burn) that accelerated the speed at which BNB is being burned.

The Binance Evolution Proposal (BEP) 95, implemented in November 2021, added a real-time burning mechanism to the BNB Chain. It allows the smart contract to automatically burn a portion of the gas fees collected by validators from each block (produced on average every 3 seconds).

It’s worth noting, though, that the BEP-95 burning mechanism will continue even after the 100 million token mark is reached, as it depends on the BNB Chain network.

How Many BNB Have Been Burned So Far?

As mentioned above, Binance’s ultimate goal is to decrease the circulating supply by 50%, starting from 200 million BNB in 2017. Aside from the daily burning mechanism, which has removed 106,000 coins out of circulation by now, the company has completed 20 scheduled quarterly auto-burns.

The latest occurred earlier in April 2024, and 1,944,452.512 BNB were burned. This amount equaled $1.7 Billion, calculated at prices on April 24th.

As of writing these lines, the total number of BNB burned is just over 54 million (equivalent to $51 billion as of today’s prices), meaning that the circulating supply left is still about 147 million. The next burning event will be in Q2 of 2024, and so far, the estimations show about 1.6 million BNB will be removed.