Introduced in October 2021, Binance Evolution Protocol (BEP) introduces a real-time burning mechanism into BSC’s economic model, making BNB’s tokenomics more dynamic.
With BEP-95, the network burns a fixed portion of each block’s gas charges that validators collect. The exact ratio is determined by the governance mechanisms of BSC. The burns will take place even if BSC reaches its goal of 100 million BNB.
By reducing the BNB supply, the price of the coin is pushed up. The BEP can also reduce the number of BNB delegators and validators received. With increasing price pressure, however, the fiat value could also increase and compensate for a possible reduction in coins.
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In order to implement this technically, the network collects the gas fees for each block and is divided into two smart contracts:
- System premium contract – This contract is responsible for keeping a maximum of 100 BNB. If the inventory falls below this specified number, 1/16 of the gas fee used for transactions is transferred to the contract. The funds held under this contract will be used for “cross-chain package promotions”.
- Validator Set Contract – The rest of the gas charges are held under the validator set contract. This contract is responsible for the issuing of gas charges for validators and / or delegators within the BSC network. These funds are then passed on to the Binance Chain and further shared among the validators
The introduction of a burning mechanism by Binance followed the similar EIP-1559 change implemented on the Ethereum network in August 2021.
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