Binance has completed its 21st quarter burn of BNB tokens today, compensating for losses from last week’s bridge hack.
BNB is the native cryptocurrency for the BNB Chain. It was previously known as the binance Smart Chain. This is a rival to Ethereum. A “burn” is when tokens are removed permanently from a cryptocurrency’s supply. It is usually used to combat inflation. Today’s market burn cost 2,065,152.42 Bitcoins (or \$549 million at current price).
An exploit on the BNB Chain Bridge last week netted the attacker precisely 2,000,000 BNB.
Conjured from thin air using artificial withdrawal evidences, it was a comparable attack. At the time, the BNB stolen was valued at $566 million.
BSC chain validators had to freeze the network after the attack. The hacker lost most of these coins. To repair some damages, the network conducted a hardfork but the hacker managed to transfer approximately $100 million of funds to other chains.
Although technically no funds were lost during the hacking, BNB does not allow users to mint new coins. This is because BNB is supposed be a deflationary token. This is achieved through quarterly BNB buybacks by Binance and an on-chain feature which burns a portion BNB transaction fees in real time.
The quarterly burns used to be based on Binance’s profits from BNB trades on its exchange. However, they have now been replaced by an “auto-burn” formula. Based on the number and price of BNB, the formula calculates how much BNB to be burned. The general rule is that the quarters in which BNB are burned will be more expensive if the coin’s price rises.
Binance’s previous fire in July saw 1.96 Million tokens being burned. It was worth $444.6million at that time.
Binance also helps to burn Luna Classic tokens using the same method as its previous quarterly burn model. It collects fees from LUNC trades, and then uses them to purchase back the token from market.
Binance’s periodic fires will stop when the BNB supply is less than 100,000,000 tokens. This is less than half of the token supply since its launch.