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Binance cryptocurrency exchange will implement a mechanism to automatically burn BNB Auto-Burn coins. It will bring more transparency to the Binance Coin and Binance Smart Chain communities.
As reported by Binance in a blog post, instead of destroying BNB coins on a quarterly basis, the BNB Auto-Burn mechanism will be verified, operating independently of the proceeds generated on the centralized Binance exchange through the use of BNB. Its action will be automatically adjusted, so the number of coins to burn is based on the BNB price, which reflects the supply and demand for them. In addition, the number of blocks created during the quarter will be taken into account, which will be calculated based on the chain information. The formula looks like this:
B is the amount of BNB to destroy. N is the total number of blocks created on the Binance Smart Chain (BSC) during the calendar quarter. The time to create a block in BSC is about 3 seconds, so the number of blocks produced per hour will be about 1200 (3600 seconds per hour is divided by 3). Considering that there are three months in a calendar quarter, N equals 3600 ÷ 3 × 24 × 30 × 3 = 2,592,000, where 24 is the number of hours per day, 30 is the number of days in a month, and 3 is the number of months in a quarter.
P is the average price of BNB in USD. We are talking about the average sample value of the price oracle on the BSC (for example, ChainLink), the sample rate will be 10,000 blocks, which is now equivalent to about 8.3 hours.
K is a constant value as a “price anchor”, initially set at 1,000. The mechanism will stop when the total BNB circulation falls below 100 million. This value can be changed with a BEP proposal and community vote.
The chart below shows the expected amount of the quarterly automatic coin burn at the average BNB rate. After the implementation of the BNB Auto-Burn mechanism, the predicted amount of combustion, which will be calculated using the above formula, will become publicly available.
As a reminder, Binance conducted its seventeenth quarterly coin burn in October, destroying 1.3 million BNB worth a record $ 640 million.
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