Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
Binance Smart Chain (BSC) recently activated BEP-95, which integrates a real-time burning mechanism into its tokenomic structure. From now on, a fixed ratio of gas fees collected by BSC validators will be burned in each block.
The Real-Time Burn Begins
BSC announced the new mechanismâs launch over Twitter earlier this week. Its burn ratio â adjustable by governance â reportedly sits at 10% right now.
BEP-95 was introduced on October 22nd, with the goal of speeding up Binanceâs burn process and further decentralizing the network. The company also theorized that this will drive up the price of BNB tokens, presumably through increased scarcity.
âWhile implementing this BEP might decrease the total amount of BNB that validators and delegators receive from staking, the fiat-denominated value of their rewards may increase,â claimed Binance. âThis burning mechanism would further reduce BNB supply; thus, increasing demand would drive the BNB value higher.â
Binance has been manually conducting BSC burns since its inception. Its aim was to reduce BNBâs total supply by 50%, from 200m to 100m tokens. One such burn was conducted shortly before BEP-95 was announced, taking $640 million (1,335,888 BNB) off the network.
Binanceâs real-time burn will work alongside the exchangeâs scheduled burn events. Notably, it will remain in effect even after the scheduled burns have reached their 100m BNB supply target. As BEP-95 reads: âBy design, BNB is a deflationary token.â
Binance Burning Versus Ethereum
Binanceâs new burning mechanism is similar â but not identical â to Ethereumâs. While both chains collect tokens for the burn pool through transaction fees, some BSCâs fees are still used to compensate validators. On Ethereum, all mandatory fees are sent to the burn pool, with a âtipâ option available for transactors to compensate miners. The rest of minersâ compensation is delivered through block rewards.
Furthermore, as Binance uses proof-of-stake, there are no new tokens entering circulation to balance out the burn. Meanwhile, Ethereumâs block rewards and burn pool work against each other when influencing currency supply. This sometimes results in a net-deflationary time period for Ethereum but still produces an inflationary environment overall.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.