The proposal looks a lot like the EIP-1559, which the Ethereum blockchain recently activated. The price of BNB could rise due to a further reduction in its supply in circulation amid growing demand.
The Ethereum blockchain recently incorporated a fee-burning system with the EIP-1559. Likewise, Binance Smart Chain developers plan to add something similar to that network.
Binance Evolution Protocol 95 (BEP-95) consists of a mechanism to burn BNB, the cryptocurrency of that network. If approved, the BEP-95 will destroy 10% of the fees paid instead of sending them to validators.
The burning of BNB already occurs quarterly and the coins destroyed are related to the fees paid on the Binance exchange. On some occasions, the burns of that cryptocurrency have exceeded USD 500 million.
The Reduction of the Circulating Supply Raises the Price of BNB
The destruction of BNB and the reduction of its supply in circulation increase the scarcity of that crypto asset. Amid growing demand, that could cause an increase in the price of the cryptocurrency.
Implementing that BEP could decrease the total amount of BNB that validators and delegates receive for staking. Since such a burning mechanism would reduce the supply of BNB, increased demand would raise the value of BNB, according to Binance Smart Chain.
The creator of Ethereum, Vitalik Buterin, recently burned 8% of the circulating supply of UBI, a basic income token on that network. That produced an increase in its price above 3,000% in less than an hour.
At the time of writing this article, the supply of BNB in circulation is 166,801,148 units, according to CoinMarketCap. The burning of Binance cryptocurrency fees will continue until just 100,000 BNB remain.
Although Binance’s BEP-95 is similar to Ethereum’s EIP-1559, they are not the same. While the Ethereum proposal added a system for paying tips to miners, the Binance Smart Chain will not have it.
Voting for a Proposal on the Binance Smart Chain
For the approval of the BEP-95, it has to pass a voting process based on the power of validators. The amount of BNB they have staked will determine that power.
At the time of writing this article, the Binance Smart Chain has 44 validators, of which only 21 are active, according to BscScan. Those with the highest voting power are CREAM (4.91%), BscScan (4.91%), and Ciscox (4.95%).
The BEP-95 is still at the so-called drafting stage, as it must receive a minimum initial deposit of 2,000 BNB. Voters then receive that amount back to allow the vote.
The validators on the network must choose between approving (yes) or rejecting (no) the proposal. The answer that exceeds 50% of the voting power will determine what will happen with that proposal.
BNB is trading at around USD 485 and has accumulated a 1.2% profit in the last 24 hours. It has a market capitalization of approximately USD 81,6 billion, which places it in 3rd position of the cryptocurrency ranking, according to CoinGecko.
By Alexander Salazar