What Is a Coin Burn?
Coin burning is the process of permanently removing coins from circulation, reducing the total supply. In order to explain how this is achieved and how it works, we will be using Binance Coin (BNB) as an example.
Binance performs periodic Coin Burn events through the use of a smart contract function known as burn function. The BNB burning events are scheduled to take place every quarter until 100,000,000 BNB are finally destroyed, which represents 50% of the total BNB ever issued (200,000,000 BNB).
The amount of BNB coins to be burned is based on the number of trades performed on the exchange within a 3-months period. So after each quarter, Binance burns BNB according to the overall trading volume.
However, it seems that a considerable amount of people still fail to understand how Coin Burns are executed. The present article aims to provide relevant information in regards to the burn function and the quarterly BNB Coin Burn events.
How does it work?
Basically speaking, a token burn event happens in the following order:
- A coin holder will call the burn function, stating that they want to burn a nominated amount of coins.
- The contract will then verify that the person has the coins in their wallet and that the number of coins stated is valid. Only positive numbers work.
- If the person does not have enough coins, or if the stated number is invalid (e.g., 0 or -5), the burn function will not be executed.
- If they do have enough, then the coins will be subtracted from that wallet. The total supply of that coin will then be updated, and the coins will be burned.
If you execute the burn function to burn your coins, they will be destroyed forever. It is impossible to recover coins after they are burned.
In other words, the Binance Coin contract has a function known as burn function, which is available to anyone, at any time. By calling this function one can permanently remove a nominated amount of coins from the circulating supply. All coin burns are recorded as a transaction on the blockchain, meaning that they are 100% transparent and anyone is able to verify that the coins have been destroyed.
As soon as a quarterly Coin Burn takes place, Binance makes an official announcement that specifies the amount of BNB coins that were burned (based on the trading volume for that quarter). You can verify all BNB Coin Burn transactions on an Ethereum blockchain explorer, such as Etherscan. The burning transactions are public, irreversible and permanently recorded on the blockchain.
On Etherscan, you can see the details about a burning transaction on the Input Data box.
If you click Decode Input Data, you can check the amount of BNB that was burned. The number includes the 18 decimals, so in this example 1,623,818 BNB were burned.
As of January 2019, Binance completed 6 BNB Coin Burn events. In total, 10,824,471 BNB coins were burned, reducing 5.41% of the Total Supply.
|Coin Burn||BNB Burned||BNB Price||Approx. USD Value||% of Total Supply|
Binance Quarterly Coin Burns.