Binance completes its tenth BNB token burn, but it no longer represents how much profit is made in the quarter.
Recently, the mainstream exchange "Binance" executed the 10th burn of its platform token BNB. Since the burning amount is no longer pegged to the quarterly profit of Binance exchange since last year, it is no longer possible to infer Binance's profit growth based on the amount of tokens burned. This event has sparked discussions in the cryptocurrency community.
Table of Contents
- Priced in USD, this is the second largest coin burn event in Binance's history
- It's difficult to estimate Binance's quarterly profit growth after the change in the coin burn mechanism
During the second quarter of last year, Binance's quarterly coin burn was still determined by 20% of the profit for the quarter. However, in the middle of last year, Binance made an undisclosed change to its whitepaper, decoupling the coin burn from profits.
The coin burn took place on January 19th, with Binance destroying 2,216,888 BNB tokens, equivalent to 38.8 million USD. In terms of fiat value, this is the second largest burn, and in terms of BNB units, it's the third largest.
The report suggests that decoupling the burn from profits may be due to Binance's concern that BNB could be classified as a security. If profits were linked to the BNB burn mechanism, regulators would be more likely to consider BNB as a security. Therefore, the whitepaper was changed so that the burn mechanism would be based on the quarterly trading volume.
Difficulty in Estimating Binance's Quarterly Profit
Binance is undoubtedly a successful mainstream exchange today, but it is no longer possible to determine whether its profit continues to grow from the burn events. Cryptocurrency analyst Larry Cermak pointed out on Twitter:
I just realized that almost no one knows that Binance changed its whitepaper last summer and no longer burns BNB based on profits. All analysis (including Arca and Messari) is wrong, but CZ (Binance CEO) is still happy to retweet and participate.
They are now burning BNB based on trading volume.
TIL almost no one knows Binance changed their whitepaper last summer and no longer burns BNB based on profit. All analysis floating around (by Arca and Messari) is not accurate and yet CZ is happily retweeting and engaging with it. They now burn BNB based on traded volume
— Larry Cermak 🫡 (@lawmaster) January 21, 2020
Despite this, some analysts still calculate Binance's quarterly profit based on a 20% profit model. Cryptocurrency investment firm Arca analyst Alex Woodard still stated on Twitter that Binance's profit this time reached 188 million USD, a new high since 2017.
However, Binance no longer ties its coin burn mechanism to 20% of the quarterly profit, so it is no longer possible to accurately calculate its quarterly profit.
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