On August 5, 2021, the London update of the Ethereum network (ETH) saw the implementation of EIP-1559, which, in a nutshell, destroys a proportion of ether on each and every transaction fee made on the blockchain. Drastically reducing inflation on Ethereum in this way has for some helped push the price of ether higher, which has given ideas to Binance and its homegrown blockchain.
Ethereum leads innovation, Binance surfs it?
Since EIP-1559 was implemented on the Ethereum network last August, hundreds of thousands of ethers have been “burned”, in other words destroyed.
Since, unlike Bitcoin (BTC), the ETH network does not have a limited maximum supply, the aim of the maneuver was of course to strongly decrease this inflation, and even potentially to make the system deflationary, when the destroyed transaction fees are higher than the new mined ethers.
A change of operation that seems to strongly inspire the Binance platform for its own blockchain network. Indeed, in a recent publication, the crypto exchange announced that it would like to implement a very similar enhancement, called “BEP-95” to its Binance Smart Chain (BSC).
A copy of Binance even better than the original?
Like Ethereum’s, this upgrade features a mechanism for destroying BNB tokens, which will be taken from the gas fees (the transaction fees). But there are still a few peculiarities of its own (in order to avoid plagiarism?).
On the one hand, each block will burn a fixed ratio of BNB on the gas fees, but this burn ratio will be adjustable by the governance of the Binance Smart Chain. Binance’s blockchain development teams are proposing an initial burn ratio of 10% of the NBBs from the transaction fees.
Binance Smart Chain copy EIP 1559 burn Ethereum announces BEP 95
Another very important point: the number of existing BNB is limited and defined, unlike ETH. Initially 200 million units, the outstanding supply of Binance Coins is already reduced every quarter.
Indeed, Changpeng Zhao’s platform already destroys BNBs during burn events, depending on its turnover. The 17th and most recent one saw more than 1.3 million BNBs burned, or more than $630 million at the time of the burn.
These quarterly destructions, however, are to stop as soon as there are only 100 million BNBs in circulation, which would not be the case for the BNBs burned by BEP-95, whose destruction would continue if the enhancement were passed:
“BEP-95’s proposed destruction is solely dependent on the activity of the BSC network and will continue to operate (and decrease the supply of BNBs), even after the [quarterly] Binance.com BNB burn events reach the target of 100 million BNBs in circulation.”
The goal, clearly stated by Binance, is “to improve the intrinsic value of BNBs” by making them permanently deflationary, if BEP-95 is passed. If the teams of the exchange platform Binance are more likely to follow the innovation (of Ethereum) than to lead it, they seem on the other hand to know quite well how to optimize it to the most profitable.
