The Binance Smart Chain (BNB) left the cryptocurrency community astounded when it decided to carry out the regular bun of nearly 1.99 million of its native BNB tokens. The burned tokens have been moved permanently out of circulation and amounted to almost $484 million. This unexpected development has managed to attract the attention of many investors and crypto enthusiasts creating a buzz about the digital assets market landscape.
The BNB Smart Chain
Binance is one of the world’s leading cryptocurrency exchanges witnessing unprecedented popularity since its advent in 2017. It remains the most popular platform housing more than 350 cryptocurrencies and tokens and offers attractive and lower transaction fees along with many airdrops and rewards.
A parallel blockchain called the Binance Smart Chain was launched in September 2020 on the BNB Beacon chain to facilitate a low-cost, high-speed, and scalable ecosystem for decentralized applications (dApps). BNB token remained at the heart of it fueling the entire BNB chain ecosystem and remains potentially the top ten cryptocurrencies to invest in.
The most recent token burn event categorized as the 24th quarterly one was a groundbreaking move in the BNB ecosystem. As a result of the burn event, the total supply of BNB tokens is now half of what it originally had i.e. 100 million BNB in circulation now.
What is a Burn Event in Crypto?
Burning in the cryptocurrency world simply means destroying the token. Under this system, certain tokens are permanently removed from circulation. The desired number of tokens are transferred into a burn address, typically a wallet from which it cannot be retrieved.
Why is this done? The burn is executed to create a “deflationary” condition. In simple words, it means reducing the supply of the token in the market. Following the fundamental principles of economics, this event draws its inspiration from the law of demand and supply. Assuming that the demand for the token remains the same, this shortage in supply is expected to surge the price of the remaining digital assets.
The price is not expected to shoot up overnight but over the course of time. This establishes a feeling of assurance in the potential investors that the token’s store of value enhances as the supply continues to reduce over a period of time.
Implications for the Crypto Industry
Binance move was well-thought especially when it comes to the investors believing in the long-term future of the digital asset. By halving the number of tokens in circulation, BNB created a shortage of the tokens available in the market. As demand potentially exceeds supply, the BNN token’s value could see an upward movement.
The magnitude of the token burn has garnered the interest of not just the investors, but also institutional investors, mainstream media, and regulatory bodies. With time institutional investors are seen to gradually creep their way into the crypto world owing to its higher return and diversification.
BNB’s evolutionary move of burning tokens worth $484 million has prominent implications in their ecosystem. Though the event has not created a considerable surge in the past 24 hours as the trader reported the prices to remain flat, the motive was to benefit its community in the longer run.
Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
