Introduced in October 2021, the Binance Evolution Protocol (BEP) introduces a real-time burning mechanism into the economic model of BSC, making BNB’s tokenomics more dynamic.
With BEP-95, the network burns a fixed ratio of each block’s gas fees that validators collect. The exact ratio is determined via BSC’s governance mechanisms. The burns will take place even after BSC has reached its target goal of 100 million BNB.
By reducing the supply of BNB, upwards pressure is placed on the coin’s price. The BEP may also decrease the amount of BNB delegators and validators received. However, with upward price pressure, the fiat value could also increase, offsetting any reduction in coins.
To technically implement this, the network collects each block’s gas fees and splits between two smart contracts:
- System Reward Contract – This contract is responsible for holding a maximum of 100 BNB. If the holding goes below this stipulated number, then 1/16 of the gas fee being used for transactions is transferred to the contract. The funds held within this contract are used for “cross-chain package subsidies”
- Validator Set Contract – The remainder of the gas fees are held within the Validator Set contract. This contract is responsible for issuing gas fees for validators and/or delegators within the BSC network. These funds are further directed to the Binance Chain and further split amongst the validators
Binance’s introduction of a burning mechanism came right on the heels of the similar EIP-1559 change which was implemented in August 2021 on the Ethereum network.
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