The implementation of EIP 1559 in ETH as part of the August London hardware event apparently also inspired the developers of the rival Binance Smart Chain (BSC). They would like to implement an update that, like ETH, would burn Binance Coin (BNB) coins in real time.
Cryptocurrency Binance Coin (BNB) has had its own coin burn mechanism since its inception, ie the burning of BNB coins. It is implemented once a quarter with the aim of reducing the final supply of BNB coins in circulation from primary ones 200 million BNB on final BNB 100 million, or 50%. The last time the 17th coinburn burned the BNB in record value over $ 640 million (burned in total 1 335 888 BNB). It was a part of the quarterly profit of the Binance exchange, which thus supports the coinburn BNB, which it committed to within the whitepaper at its inception.
The current setting is probably not enough
However, this process, thanks to which Binance Coin is a real deflationary cryptocurrency (unlike ETH or BTC), is clearly not enough for the community yet. Therefore, a proposal was made to introduce a protocol with the designation BEP-95, which would introduce the real-time automatic burning of BNB coins into the Binance Smart Chain blockchain.
BEP-95 would, like EIP 1559 at ETH, burn coins for finances that were previously intended to pay transaction fees. However, while in the case of ETH 100% of the fees are burned (which belonged to miners before the arrival of EIP 1559), the Binance Smart Chain has not yet decided how much of the fee will go to the validators and how much will be burned.
If this proposal passes in any form, Binance Coin could significantly speed up the process of burning its coins. From this intention, it is clear that the community around the cryptocurrency, which is strongly tied to the Binance exchange, wants the rarity of BNB coins at a time when the approaching peak of the bullrun is expected.
What is the success of burning at ETH?
From the implementation of EIP 1559 to ETH (August 5, 2021), it was burned until the time of writing this article 619 964 ETH, which is around $ 2.5 billion (at the current ETH price). As a result, ETH inflation has fallen by 56.63%, while this percentage is constantly growing.
Thanks to EIP 1559, ETH has become rarer in terms of the number of coins in circulation, as it is produced less than before this update. At the same time, the ETH community believes that the percentage of burnt coins to those in the meantime will be even higher, and there will be more and more repetitive moments when the number of ET generated is lower than the number of ETHs destroyed at the same time.
In the future, the possibility cannot be ruled out that ETH will become deflationary thanks to EIP 1559, ie. the total number of coins in circulation will gradually decrease. ETH fans in context, speak of this cryptocurrency as “ultra sound money„. However, this can only happen with a combination of certain circumstances related to transaction fees, the number of coins that will be involved in staking and the number of transactions on the ETH network itself.
It is also important to note that the current effect of the ETH inflation slowdown is largely driven mainly by high transaction fees per transaction, which contributes to the inflation slowdown and may help to perceive ETH as a valuable asset, but slows down the network’s potential as such, because high fees are certainly not what a normal smartchain network user would want.
Unlike ETH, Binance Coin is already deflationary, and the addition of the BNB’s burning of transaction fees will only accelerate its pace of deflation. However, the question is whether, in the case of the implementation of BEP-95, the Binance exchange would not change its policy, which could, on the contrary, slow down the pace of burning by allocating a smaller part of its profits to burning on a quarterly basis.