Binance bridge hack prompts company to burn tokens

Image source: Coin Gape

Binance recently ended its 21st quarterly burning of BNB tokens to offset losses from the Binance Bridge hack last week.

BNB burn

BNB is the native cryptocurrency of BNB Chain (formerly called Binance Smart Chain), which competes with rival cryptocurrency Ethereum.

Burning is a process in which tokens are permanently removed from cryptocurrency inventory.

It is generally used as a measure against inflation.

Binance Burn burned exactly 2,064,152.42 BNB from the market.

The tokens were worth over $549 million at current prices when they were burned.

The hack

Last week, a hacker took advantage of BNB’s chain bridge and managed to obtain over 2,000,000 BNB with artificial withdrawals.

At the time, the stolen BNB had a net worth of approximately $ 566 million.

After the theft, most of the coins were lost when BSC chain validators froze the network.

Since then, the network has had a hard fork to repair some of the damage.

A hard fork is a patch release described as “temporary” to enable cross-chain functionality between BNB Beacon Chain and Binance Smart Chain. However, the hacker managed to transfer over $ 100 million in cash to other channels.

After the hack

Despite the hack, no Binance users lost money during the robbery.

Instead, it led to a rule banning the minting of new coins for BNB, which was intended as a deflationary token.

The action was accomplished through Binance’s quarterly BNB buybacks.

This was also done with an on-chain feature that burns out some of the BNB transaction costs in real-time.

Quarterly burns

Previously, the quarterly burns were based on Binance’s profits from BNB’s operations on its trading platform.

Since then, however, Binance moved to a formal “auto-burn” model.

The formula calculates the amount of BNB to burn depending on the number of BNB chain blocks available during the quarter, along with the price of BNB.

In general, the higher the price of the coin at that time, the more BNBs will be burned each quarter.

The company’s July fire burned 1.96 million tokens, for a total of $ 444.6 million that month.

Other notes

Binance also helps burn Luna Classic Tokens (LUNCs) using the same approach as the latest quarterly burning model.

The burn takes fees from LUNC tokens to buy back the token from the market.

Binance’s periodic burning will only stop when the BNB supply reaches lower than 100,000,000 tokens, which is less than 50% of the token supply since the initial launch.

Reference:

Binance burns as many BNB tokens as hacker minted from thin air

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