BSC mimics Ethereum by proposing a token burning mechanism, while Terra plans to burn 10% of LUNA to aid ecosystem development.

In order to accelerate the burning speed of BNB and further decentralize the Binance Smart Chain (BSC), developers of BSC introduced a new proposal BEP-95 last week, aiming to implement a token burning mechanism similar to EIP-1559. The founder of Terra also proposed a plan to burn LUNA, with the generated UST being used to fund the insurance protocol Ozone.

Introduction to BEP-95

BEP-95 proposal aims to introduce a real-time token burn mechanism on BSC to increase the burning rate of BNB and enhance its value. The proposal has two main points:

• Gas Fees collected by node validators will be burned at a fixed ratio in each block.
• The change in burn ratio will be determined by BSC validators through proposal voting based on their voting power staked with BNB.

If the proposal is passed, the BNB rewards that node validators and delegators can receive will decrease, but the actual value may increase due to the rise in BNB price. The initial burn ratio is set at 10%.

According to data from BscScan, BSC nodes are estimated to receive around 6,000 BNB as fees per day in the second half of this year. With a 10% burn ratio, this means approximately 600 BNB will be burned daily, equivalent to around $290,000, resulting in about 0.2% of the circulating supply being burned over the course of a year.

Community Perspectives

Various opinions have been raised within the community regarding this proposal. Some believe that the usefulness of EIP-1559 on Ethereum is due to the generation of new ETH as block rewards, which is not applicable to BSC as there is no such mechanism. Unrestricted currency tightening may significantly reduce token liquidity in the market as token value rises.

However, some argue that while BNB has a quarterly burn mechanism, the speed is too slow and the burned BNB comes from team-locked BNB. Only through the mechanism of BEP-95 can the circulating supply of BNB be truly reduced in the market and its value enhanced.

LUNA Token Burn Proposal

Co-founder of Terra, Do Kown, announced last week that a proposal will be made this week to burn 90 million LUNA tokens from the community fund pool to mint around $3.4 billion worth of UST. Some of these minted UST will be used to support the development of Ozone, an insurance protocol on Terra, which is the focus of Terra Columbus-5 upgrade.

The total supply of LUNA is approximately 970 million tokens, with a circulating supply of around 400 million tokens. If the proposal is passed, it will reduce about 9% of the total supply. Additionally, Do Kown mentioned that the conversion of LUNA to UST will generate a significant amount of SWAP fees, and staking LUNA on the Terra chain will increase earnings by 5 times.

However, while this burn may seem like a positive news for LUNA, the burned tokens are not in circulation, limiting the impact of currency tightening on the token price.

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