Binance just proposed the new Binance evolution protocol, BEP-95. This BEP introduces real-time burning into BSC’s economic model, making BNB’s tokenomics more dynamic.
What is Bep-95?
BEP-95 is a new Binance Coin (BNB) burning mechanism on the Binance Smart Chain platform that reduces its circulating supply.
The summary point behind this BEP is to speed up the burning of Binance Coin (BNB) and make BSC more decentralized, as part of the gas fees will be burned. BEP-95 burn is solely dependent on activity on the BSC network and it will continue to work (reducing BNB supply), even after Binance’s scheduled BNB burn reaches its target supply of 100 million BNB circulated.
Please note that this BEP is still in the drafting stage.
Two points before we begin: Each block will burn a fixed percentage of the gas fees collected by validators in each block. The burn rate is adjustable via admin.
Why does BSC need BEP-95?
The BSC network can speed up the burning of BNB and improve its intrinsic value by burning part of the gas fee. BNB holders will decide how to send BSC gas rewards.
While this implementation of BEP may reduce the total amount of BNB validators and delegators receive from staking, the value of their rewards may increase as the amount of BNB coins becomes increasingly scarce. This combustion mechanism will further reduce the supply of BNB; therefore, increasing demand will drive the value of BNB higher.
Distribution of gas fees
By design, BNB is a deflationary token. There is no mining algorithm that allows mining of new BNB. Reward miners (validators) and supply regularly decrease according to Binance’s scheduled BNB burns. BNB is a utility token with many use cases and authorizers and validators will still enjoy other benefits from holding BNB.
Gas fees are collected block by block and divided into two system smart contracts
System reward contract. Contracts can hold up to 100 BNB. 1/16 of the gas fee will be transferred to the system’s reward contract if it owns less than 100 BNB. The capital in the bonus contract is used as the package allowance in the chain.
Contract ValidatorSet. The remainder of the gas fee is passed into the ValidatorSet contract. It is the vault to hold gas fees for both validators and delegators. The funds in the contract will be transferred to Binance Chain and distributed to the authorizers and validators according to their stake each day.
The mechanism will be activated by introducing tunable parameters: burnRatio in the ValidatorSet Contract. At the end of each block, validators sign a transaction to call the contract’s escrow function to transfer gas fees. The write logic is implemented in the deposit function that burnRatio * gasFee will be moved to the write address;
Initial recommended setting: burnRatio = 10%
BurnRatio change will be determined by BSC Validators through their voting proposal based on voting process (BNB Staking).
This process will be done on Binance Chain and any community member can suggest changes to the parameters. In order for a proposal to be considered by validators, it must receive a minimum deposit of 2,000 BNB (mainnet). This will allow validators to vote on the proposal; all BNB is returned after the proposal has been voted on. BSC validators can vote “for” or “against” based on their voting rights.
Let’s say the total voting power of validators with a voting limit for it reaches the quorum (50% on mainnet). In that case, the proposal will be adopted and the corresponding change of the parameters will be communicated to the BSC via cross-chain communication with immediate effect. Votes of non-binding validators will not be considered for the counting of votes.
Explanation of BEP-95
The BNB burning mechanism is quite similar to the ETH burning mechanism of EIP-1559.
BEP-95 is completely independent of Binance’s current quarterly BNB burn.
Since the two burn mechanisms are separate, the total supply of 100 million BNB will no longer exist and BEP-95 can reduce BNB deflation below 100 million.
What are the benefits if BEP-95 is passed?
If BEP-95 is passed, there will be many benefits for BNB. Making BNB more and more scarce, the price of BNB increases. Make the BSC ecosystem more decentralized. Whether GAS fees will increase or not is currently unknown.
Above is all the information to help you understand what BEP-95 is and how it benefits. Proposal BEP-95 is a progressive proposal, showing that Binance knows how to listen to users and is always improving for the better.