Recently, Binance Smart Chain posted a proposal called BEP-95. So what’s important about this proposal?
Let’s find out with fastnewscrypto
What is BEP-95?
BEP-95 is a new BNB burning mechanism that was just proposed on October 22. BNB will be burned per block with an initial suggested burn rate of 10% of the total gas fee.
This means that the reward for validators will be reduced by 10%. However, the burn rate can be changed by the governance mechanism.
How does BEP-95 work?
Upon finalizing each block, the Validator will sign a transaction that calls the deposit function to transfer the gas fee.
When the deposit function is executed, a part of the gas fee will be calculated: burnRatio * gasFee and transferred to the burn address.
What if BEP-95 is approved?
Binance Coin was released in 2017 with a total supply of 200,000,000 BNB. This is a utility token that has a limited supply and will not be created more.
According to the Whitepaper, Binance will burn Binance Coin quarterly until only 100,000,000 BNB (50% of the total supply) remains.
After 17 times of coin burning, the current total supply has reached 166,801,148 BNB with the number of BNB burned is 33,198,852 BNB (~16.6% of total supply).
If BEP-95 is approved then the BNB burn will be accelerated.
The maximum supply of BNB will not only stop at 100 million BNB but it will continuously decrease after each new block is created.
The average time a new block is created is about 3s. This means that every 3 seconds, a certain amount of BNB will be burned.
This will positively affect the price of BNB.
Gas Fee Increases
Unlike the EIP-1559 update on the Ethereum network that solves the problem of gas fees, the published BEP-95 proposal does not mention reducing gas fees on the network.
The deflation on BNB causing a scarce supply can push up the price of BNB so gas fees can also increase.
The increase in gas fees may not benefit users. However, the increased gas fee will be good for the network because it will avoid spam attack (the thing that is happening on Polygon because the fee is so cheap).
It will also partly create motivation for devs to develop projects on BSC.
The gas fee may increase, but in my opinion, this fee will be acceptable and not be too high.
Validators’ incomes decrease
Instead of validators receiving 100% of the reward per block by validating transactions, it will now only be 90% if it follows the recommended 10% burn rate.
The decrease in income is only considering the amount of BNB collected, but if calculated in fiat, it may increase due to the increase in BNB price.
Moreover, validators can change the burn rate through the administrative mechanism, so this proposal will not affect the validators.
Will BEP-95 be approved?
According to the introduction of BEP-95 on Binance.org, this is only a proposal phase, so it is not certain that it will be implemented.
But after being announced, BEP-95 also received positive signals from the community as well as from CZ – CEO of Binance.
CZ’s Twitter retweeted the introductory post and tweets in support of this new burning mechanism.
Although there is no official announcement yet, perhaps BEP-95 will soon be updated on Binance Smart Chain.
In my opinion, BEP-95 is a very good proposal. This proposal will play an important role in making BNB’s tokenomics more attractive to investors.
Hopefully, BEP-95 will soon be approved in the near future.
This article is for informational purposes only and is not investment advice.