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Community’s Request

Binance, announced on December 22 that it has moved to introduce an auto-burn mechanism to replace its quarterly burn as requested by its community with immediate effect. This announcement came not long after the Bruno upgrade that introduced real-time burning mechanism. 

The automated protocol removes $BNB from circulation forever in line with the community’s call for more transparency and predictability. Binance, in its announcement said: ‍

“BNB is its own living, breathing ecosystem. Therefore, in alignment with the interests of the BSC and BNB communities, Binance is today announcing the implementation of a new BNB Auto-Burn procedure.  The newly introduced BNB Auto-Burn is designed to further build a healthy blockchain ecosystem together with the BSC & BNB communities.”‍

$BNB is the native token that powers the Binance Smart Chain (BSC). $BNB is also needed to participate in on-chain governance of BSC. The price of $BNB has been on a downward trend after touching a high of $686.31 on May 10 according to Coingecko. Burning mechanism reduces the total supply in circulation and improves the tokenomics of the crypto asset. 

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Existing Burning Mechanism 

There are currently two burning mechanisms that are deployed. First, the Bruno upgrade that took place on Nov 30 burns a portion of the gas fee on BCS in real time. 

Secondly, is the quarterly burn. Through this mechanism, a total number of 1,335,888 $BNB has been removed from circulation. If based on $BNB’s price at the time of writing, the total value burnt is approximately $736 million. The rate of burn directly correlates to the trading volume on Binance. 

Binance has committed to its community that it will remove 50% of $BNB from circulation which is approximately 100 million $BNBs. Binance has been proactively taking steps to assure its community that the value in $BNB will be preserved. Changpeng Zhao (CZ), the Chief Executive Officer (CEO) of Binance acknowledge the ‘slow pace’ of the rate of burn and introduced an accelerated burning program on the 14th $BNB burn. 

Burning will tilt the balance of supply and demand. If supply reduces and demand remains the same, there will be an upward pressure resulting in positive price movement. 

New Yew, New Challenges

$BNB enjoyed a stellar performance in 2021. This is mainly contributed by Ethereum’s problem with scalability and gas fees. However, many layer-1 solutions are starting to gain prominence the likes of Avalanche ($AVAX), Cosmos ($ATOM), Solana ($SOL) and Terra ($LUNA). Therefore, one way of ensuring that $BNB remains viable as an investable asset is to improve on its tokenomics. 

In Binance’s blog, the auto-burn feature is the next phase of $BNB and BSC’s evolution. ‍

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