Binance recently burnt 1.68 million BNB tokens worth $795 million as a part of an ongoing deflationary process, however, in the auto mode for the first time.
As per a recent blog post on Binance’s official website, the largest cryptocurrency exchange in the world (by daily trading volume) successfully concluded the first-ever quarterly auto-burn of its BNB tokens. It was the 18th BNB burn overall. A total of 1,684,387.11 tokens worth $795 million were destroyed as a part of the new automated process.
The auto-burn is a very objective method, created in response to Binance community’s feedback. The number of tokens to be burnt are calculated based on BNB’s average dollar price and the total number of blocks added to the Binance Smart Chain, during the quarter. This is quite different from the previous approach wherein the figure used to be arrived at by factoring in the revenue generated by the Binance crypto exchange.
Commenting on the first auto-burn, Changpeng Zhao, the CEO and co-founder of Binance said, “The implementation of the BNB Auto-Burn is a natural next step in BNB’s journey and will help the BNB community grow through providing greater autonomy, transparency and predictability.”
About BNB burns and the rationale behind them
Ever since Binance and BNB token came into existence back in 2017, the platform has maintained that it will gradually destroy 100 million tokens from circulation, which constitutes half of the total BNB supply.
As per the crypto tools and data firm Coin Tools, the platform has already burnt almost 35 million tokens through these quarterly burns, with the total number of BNB tokens in circulation standing at 165,116,761 as of writing. The first burn happened on Oct 18, 2017.
The primary purpose of such token burns is to bring about a deflationary effect and make the cryptocurrency more appealing as a medium of value storage. While in conventional finance, the term deflation implies price decline, in crypto parlance it means a process through which a token’s circulating supply is reduced over a period of time, thereby making it inflation-resistant and more attractive for investors.
Having stated the above, the recent 18th burn has failed to have the expected deflationary effect on BNB. At press time, the token was trading at $425, much lower than its 30-day high of $571.55 and all-time high of $690.93.
BNB/USD Daily Chart. Source: TradingView