The Binance blockchain could see a fee-burning mechanism similar to the one Ethereum introduced with EIP-1559. Proposal BEP-95 is waiting for a vote.
Binance Smart Chain (BSC), the blockchain of the largest cryptocurrency exchange Binance, could soon work using a token-burning mechanism similar to the one introduced on the Ethereum network.
The proposed BEP-95 update that met its introduction to BSC’s public Github this week suggests a fee-burning mechanism, somewhat similar to that implemented through Ethereum’s EIP-1559.
The goal of the procedure is to set up the accelerating of the burning process to make the native Binance Coin token a more valuable item.
The notion of ‘burning’ in this context refers to the process of permanently removing a crypto token from circulation, thereby reducing its supply and potentially boosting its price. The process usually takes place by sending the coins to an address that is not accessible to anyone, thus being destroyed.
Automatic Rate Burning for BSC
The new BSC update adds two mechanisms that would impact the network, one of these procedures is the burning of the fixed rate that gets currently distributed to validators and a manageable burn rate. The ones who made the proposal also claimed that it could make BSC more decentralized.
As such, the BEP-95 proposal suggests burning a portion of the transaction fees in each block and that the burning ratio be met and adjusted through the network’s governance system.
The result would be that the validators would receive fewer transaction fees, as the tokens would get destroyed instead. Over time, this would help set up a reduction of the total supply of BNB, which could eventually lead to a high peak.
Since the BSC network has no rewards for miners like Bitcoin and Ethereum, the transaction fee gets distributed among the validators. In the BSC blockchain, the fee gets charged on each validated block, and then it gets distributed between two smart contracts.
The proposal suggests that the portion of the burned tariffs could reach a set at 10%. Currently, the network sees around 6,814 BNB (or about $ 3.4 million) in transaction fees per day, so a burn of that amount would reduce supply to 681 BNB per day, about $ 334,000 according to current prices.
Binance Smart Chain is already the target of regular burning processes. When Binance released BNB in 2017, it promised to burn a total of 100 million tokens, that is, 50% of its total supply. The company burns massive amounts of BNB each quarter focused on the exchange’s trade fee ratio. The most recent burn destroyed 1,335,888 BNB, or nearly $ 660 million.
Proposals BEP-95 and EIP-1559 are not the Same Things
Currently, the proposal is in the draft stage and is awaiting a vote for its implementation. For the voting process to take place, the proposal must acquire a minimum deposit of 2,000 BNB. If this sum gets gathered, the network validators can vote for or against the changes to move forward.
By: Jenson Nuñez
