HomeNewsCryptocurrencyThe Binance Coin Burn Hinges on Exchange Trading Volume Rather Than Quarterly...

The Binance Coin Burn Hinges on Exchange Trading Volume Rather Than Quarterly Profits

Binance’s native currency is of great speculative value to a lot of people. That is primarily because it is subject to a buyback by the company every quarter.

However, a change has been made to how this process works exactly. The changes are documented in the whitepaper discussing Binance Coin and the exchange’s operations..

How the Binance Coin Buyback Used to Work

Holders of Binance Coin as a speculative asset may be surprised by this change. Binance’s way of buying back BNB from the market and burning the tokens has shifted significantly. This does not mean the company will buy back more or fewer tokens by default. However, the quarterly buybacks may differ greatly, depending on overall market conditions. 

Initially, the buyback plan for Binance Coin revolved around suing company profit. Up to 20% of profits generated by Binance will be used to buy back BNB and destroy them accordingly. This process is designed to remain in place until 50% of the maximum supply are bought back. That equals to roughly 100 million BNB to be bought back in total.

While that process has worked fine, some changes have been made. It is not uncommon for companies to revise their spending plans. This change is not necessarily negative, but it can shake things up significantly. In the end, the overall plan remains the same, though.

Trading Volume Plays a key Role

Instead of using 20% of profits, Binance now uses the trading volume as a metric. Based on the trading volume, the Binance Coin buyback and destruction will occur. As the exchange generates more volume, more BNB can be destroyed. However, if the value of BNB rises too quickly, the numbers will shift again.

As such, the quarterly buyback figures can differ greatly. The original plan remains in effect. Buying back 100 million BNB is still the primary objective. How long this process will take is difficult to predict at this time. 

It is also crucial to note these changes do not affect the discount obtained through Binance Coin. Those rates remain unchanged, as it does not affect the buyback or burn in any way.  The discount received by using BNB will drop to 6.75% later this year. That is also the final discount, as the discounts expire by the fifth year.

JP Buntinx
JP Buntinx
JP Buntinx is passionate about cryptocurrencies, fintech, blockchain, and finance. He currently resides in Belgium.
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