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Binance team will burn $2.4 billion of its own BNB instead of previous procedure

Posted: 12 July 2019 2:53 pm
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The burn rate remains the same. The total supply remains the same. And yet, it's a big change.


Update 13/7/2019: This page was updated to reflect that Binance does not buy the BNB coin back, but instead directly burns it.

"We never buy the BNB coin back, we just directly burned 20% of our net revenue in BNB," a Binance representative confirmed to Finder.

The Binance Whitepaper was updated earlier this year to remove references to "buybacks."


Binance CEO Changpeng "CZ" Zhao has announced that the Binance team will be burning its own tokens in lieu of the previous Binance Coin (BNB) burning procedure.

"With this change, we'll still burn BNB based on trading volume on Binance per quarter. But this time, the Binance team has given up our token allocation. We are now committing to building the Binance ecosystem without getting any BNB from the initial allocation. The team will burn their own tokens first. All US$2,400,000,000 of it! he said."

This does not change the final total supply of BNB, which will still cap out at 100 million (down from the current 189 million) after all the burns are completed. Rather, it just changes where the tokens are coming from.

Now, the Binance team will burn off the 80 million BNB team allocation first, and the remaining 9 million BNB will be burned by Binance.com.

The burn schedule will nominally not change either and the target burn rate is still based on Binance's trading volume from the previous quarter.

"This shows that the Binance team is not money-driven. We are here on a mission," CZ says.

And despite giving up their allocation, CZ notes that "the Binance team will likely continue to be some of the largest holders of BNB, as most of Binance's revenues are in BNB, and we are paid in BNB."

Opinion: What does this mean for BNB prices and why is Binance doing it?

It's not entirely clear what, if anything, this means for BNB prices in the short term. Although because the burn rate, final cap and so on are all staying the same, a good starting answer would be "nothing".

It's safe to deduce that the Binance team still has that 80 million BNB and that it's never been in circulation, on account of the fact that they're going to be burning it. As such, this change means the burnt BNB probably won't be having any immediate impact on the circulating supply.

But the same reasoning also makes it clear why this change absolutely had to happen, and why it's an excellent change in the long run.

As CZ said, the Binance team will still be among the biggest BNB holders even after burning off the team's whopping 40% of the total BNB supply. It's clear that if the Binance team didn't burn off their share, BNB would end up extraordinarily centralised with the vast majority in the hands of Binance. At the same time, you have the general public using BNB to pay fees and similar, which is another flow of BNB towards Binance.

So, with Binance and its staff already having an absolute glut of BNB, and coin ownership at risk of becoming too lopsided, it makes sense in the long run for the Binance team to start burning their holdings.

A lot of people like to compare BNB to company stock and burns to stock buybacks. While cynics can never help drawing parallels between exchange tokens and company scrip, both comparisons are misleading in their own way.

It's not stock. Rather, it's a currency/asset/utility token type digital thingamabob which defies clear categorisation. Similarly, it is not bought back but is instead simply burned. And it's certainly not company scrip, because among other reasons the goal is to actively push it into the hands of the general public rather than just employees, and to get it accepted everywhere in the world rather than just company stores.

BNB is a cryptocurrency, and it's quite unlike any others. Binance is doing something for which there is no clear roadmap, which naturally means being able to change plans, and looking on down the road to make sure you can address impending issues – such as BNB token centralisation – before it becomes a problem.



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Disclosure: The author holds BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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