Token burning is the process of permanently removing cryptocurrency from circulation to reduce its total supply. To explain how it works, let's examine Binance Coin (BNB) as a case study.
How Does Token Burning Work?
Token burning typically follows this sequence:
- Function Call: A cryptocurrency holder invokes the burn function to destroy a specified number of tokens.
- Validation: The smart contract verifies if the wallet holds sufficient tokens and if the amount is valid (positive).
- Execution: If conditions are met, tokens are removed from circulation, and the total supply is updated.
- Record: The burn transaction is permanently recorded on the blockchain for transparency.
🔥 Key Insight: Burned tokens are irrecoverable. Blockchain explorers like Etherscan allow users to verify burn transactions.
Binance Coin (BNB) Burning Mechanism
Originally, BNB was an ERC-20 token on Ethereum. Binance conducted quarterly burns via a smart contract function until 50% of BNB's total supply (100M tokens) was destroyed. Post-launch of BNB Beacon Chain, burns now occur natively on BNB Chain.
BNB Burn Statistics (2017–2022)
| Burn Event | BNB Burned | Avg. Price (USD) | Approx. Value (USD) | % of Total Supply |
|---|---|---|---|---|
| Q1 2017 | 986,000 | $1.52 | $1.5M | 0.49% |
| Q2 2022 | 1,839,786 | $403.22 | $741.8M | 0.91% |
| Total | 36.7M | — | $3.76B | 18.36% |
FAQs
Q1: Why do projects burn tokens?
To create scarcity, increase demand, and stabilize long-term value.
Q2: Can burned tokens be recovered?
No. Burning is irreversible due to blockchain's immutable nature.
Q3: How can I verify a burn transaction?
Use blockchain explorers (e.g., Etherscan for ERC-20, BSCScan for BEP-20).
Q4: Does Binance still burn BNB?
Yes, but burns now occur on BNB Chain instead of Ethereum.