Soon after Binance’s coin went through its 19th scheduled burn, FTX’s CEO Sam Bankman-Fried (SBF) launched a series of tweets in which he analyzed the BNB burning mechanism. The 30-year-old CEO came to the conclusion that “pricing drives burn,” not “burn drives price.”
The latest burning of BNB, in which more than $740 worth of the asset was destroyed, occurred earlier this week. In response to the situation, firm CEO CZ stated that this procedure causes BNB to deflate.
The algorithm that sets the burning and issuance rates of BNB tokens was decoded by SBF, who noted that the yearly issue of new coins is dependent on the asset’s price. The total amount of tokens burned each year will be around 7.142 million.
The price of BNB was a critical determinant for SBF in determining how the burning rate would be in the next years.
If BNB reaches $1,000, its total market valuation should be roughly $200 billion; SBF estimates that $10 billion worth of BNB will be burned each year until just 100 million tokens remain.
BNB’s burn rate, according to SBF, was regularly modified in tandem with its price. If the price of the coin rises above $1,000 per coin, 10 million tokens will be burned each year, wiping $10 billion from the market.
SBF predicts that if the price of BNB falls, the mechanism will cut the total supply to 100 million tokens within the next 7-10 years. There are currently 170 million BNB tokens in circulation.
He described BNB’s tokenomics as a “cool mechanism” and acknowledged that the burn rate this quarter, which would remove 1.7 million BNB from the supply, is in line with Binance’s formula.
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