The price of a token is largely determined by the demand and supply. It is easier to control the supply than the demand for the token.
BNB token comes with an Auto-burn system where it will automatically reduce the supply of the token so that it will be in an acceptable range.
Coin burning is the action of removing coins or tokens from the supply, which essentially decreases their number in circulation. To carry out coin burning, the coins are sent to a wallet address that only accepts coins, but cannot carry out transactions.
In other words, coins can only be sent to this wallet address and cannot be moved out of said wallet address. As this practice takes place, it is intended for the value of the coin to increase as the supply decreases.
Previously, BNB adopted two coin-burning mechanisms, firstly, a quarterly BNB burning event and secondly, a burning mechanism introduced in the BEP-95 that burns a portion of BNB spent as gas fees on the Binance Smart Chain (BSC).
As of December 2021, the new BNB Auto-burn mechanism was introduced, which will automatically adjust the burn amount based on BNB’s price and the supply-demand dynamics. This auto-burn is aimed at providing greater transaction transparency and predictability as it uses on-chain information from BSC to calculate the amount needed to burn BNB.
How does the BNB Auto-burn Calculation work?
There is a set rule that when the total circulating supply of BNB falls below 100 million, the BNB Auto-burn will stop, whereas the BEP-95 mechanism will still resume. The auto-burn follows a formula to burn BNB automatically as follows:
B = BNB to be burned
N = total number of BSC blocks produced during the quarter
P = average BNB price
K = constant price anchor
How to check BNB Auto-burn history?
Every burn event is publicly accessible on the blockchain and can be traced on BNBBurn.info