Note: The first part of the article explains the burn function implemented when Binance Coin was previously on the Ethereum network. Binance Coin is now on the BNB Beacon Chain, so the burn function is also handled differently. However, the above still applies to all existing ERC-20 tokens that support burn functionality.
Coin burning is the process of reducing the total supply by permanently removing cryptocurrencies from circulation. To explain how this works, we will use Binance Coin (formerly BNB ERC-20) as an example. You can find BNB's contract when it was on the Ethereum network here.
While Binance Coin was on the Ethereum network, Binance was performing Coin Burn events at regular intervals using a smart contract function known as the burn function. BNB burning events are planned to occur every quarter until 100,000,000 BNB is ultimately destroyed. This amount represents 50% of the total number of BNB mined (200,000,000 BNB).
The amount of BNB coins to be burned is based on the number of transactions made on the exchange within a 3-month period. That is, Binance burns BNB according to the total transaction volume after each quarter.
But many people still do not know how to do Coin Burns. This article aims to provide information about the burn function and quarterly BNB Coin Burn events.
How does the process work?
Basically a token burn event is done in the following order:
A person who owns a cryptocurrency states that he wants to burn a certain amount of coins and calls the burn function.
The smart contract then verifies that the coins are present in that person's wallet and that the specified number of coins is valid. The burn mechanism only allows positive numbers.
If the person does not have enough coins or the specified number is invalid (for example 0 or -5), the burn function will not be executed.
If there are enough coins in the wallet, the coins will be removed from this wallet. The total supply of this coin is then updated, meaning the coins are burned permanently.
If you implement the burn function to burn your coins, your coins will be permanently destroyed. It is not possible to retrieve coins after they have been burned, and thanks to blockchain technology, it can be easily verified on a blockchain browser that the burning actually took place.
In other words, the Binance Coin contract has a function known as the burn function, which is always available to the public. By calling this function, you can permanently remove any amount of coins from the circulating supply of a blockchain network. As we mentioned before, all token burn events are recorded as a transaction on the blockchain. The burning mechanism is transparent and anyone can verify that coins have been destroyed.
As soon as the Quarterly Coin Burn occurs, Binance publishes an official announcement stating the amount of BNB coins burned (based on trading volume in that quarter). You can verify all BNB ERC-20 Coin Burn transactions in an Ethereum blockchain browser such as Etherscan. Burns are public, irreversible, and permanently recorded on the blockchain.
You can see detailed information about a burn in the Input Data box in Etherscan.
You can check the amount of BNB burned by clicking Decode Input Data. This figure contains 18 decimal places. Therefore, in this example, 1,623,818 BNB was burned.
Current Binance Burn function
Since the launch of Binance Chain, BNB ERC-20 tokens have been gradually exchanged for native Binance Coins (BNB BEP-2). This means that Coin Burn events are now held on Binance Chain instead of the Ethereum network.
It is also important to note that all BNB ERC-20 coin burns are “duplicated” on Binance Chain so that the total supply remains the same. Therefore, 11,654,397 BNB ERC-20 tokens previously burned on the Ethereum network were also burned on Binance Chain (immediately after the launch of the mainnet). You can review this special burn in the Binance Chain Browser. You can also check the total BNB supply.
The current BNB coin burn mechanism is now based on a specific command executed on Binance Chain rather than a smart contract. You can find more information on the Binance Chain Documentation page.
As of April 2022, Binance has completed its 19 BNB Coin Burn event. A total of 36,723,852.37 BNB coins were burned, destroying 18.36% of the Total Supply (current supply is 163,292,674.61 BNB).
BNB Burn History (Quarter Coin Burn).
