Bitcoin Private-What Is a Coin Burn?

Bitcoin Private-What Is a Coin Burn?

Crypto Market
September 11, 2019 by admin
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bitcoin private burn

So, what is the coinburn, why is it happening and what happens if you don’t move your BTCP gained from the 1:1 snapshot?

Note: The first section of this article explains the previous burn function of Binance Coin while it was on the Ethereum network. Binance Coin is now on Binance Chain, and the burn function behaves differently. However, the discussion still applies to all current ERC-20 tokens that support the burn function.

Coin burning is the process of permanently removing coins from circulation, reducing the total supply. In order to explain how this is achieved and how it works, we will be using Binance Coin (the old BNB ERC-20) as an example. The previous contract for BNB while it was on the Ethereum network can be found here.

When the Binance Coin was still part of the Ethereum network, Binance performed periodic Coin Burn events through the use of a smart contract function known as burn function. The BNB burning events are scheduled to take place every quarter until 100,000,000 BNB are finally destroyed, which represents 50% of the total BNB ever issued (200,000,000 BNB). However,

The amount of BNB coins to be burned is based on the number of trades performed on the exchange within a 3-months period. So after each quarter, Binance burns BNB according to the overall trading volume.

However, it seems that a considerable amount of people still fail to understand how Coin Burns are executed. The present article aims to provide relevant information in regards to the burn function and the quarterly BNB Coin Burn events.

How does it work?

Basically speaking, a token burn event happens in the following order:

  1. A coin holder will call the burn function, stating that they want to burn a nominated amount of coins.
  2. The contract will then verify that the person has the coins in their wallet and that the number of coins stated is valid. Only positive numbers work.
  3. If the person does not have enough coins, or if the stated number is invalid (e.g., 0 or -5), the burn function will not be executed.
  4. If they do have enough, then the coins will be subtracted from that wallet. The total supply of that coin will then be updated, and the coins will be burned.

If you execute the burn function to burn your coins, they will be destroyed forever. It is impossible to recover coins after they are burned.

coin burn contract

In other words, the Binance Coin contract has a function known as burn function, which is available to anyone, at any time. By calling this function one can permanently remove a nominated amount of coins from the circulating supply. All coin burns are recorded as a transaction on the blockchain, meaning that they are 100% transparent and anyone is able to verify that the coins have been destroyed.

As soon as a quarterly Coin Burn takes place, Binance makes an official announcement that specifies the amount of BNB coins that were burned (based on the trading volume for that quarter). You can verify all BNB ERC-20 Coin Burn transactions on an Ethereum blockchain explorer, such as Etherscan. The burning transactions are public, irreversible and permanently recorded on the blockchain.

On Etherscan, you can see the details about a burning transaction on the Input Data box.

coin burning function

If you click Decode Input Data, you can check the amount of BNB that was burned. The number includes the 18 decimals, so in this example 1,623,818 BNB were burned.

coin burning amount

The current Binance Burn function

Since the launch of Binance Chain, the BNB ERC-20 tokens were gradually swapped by the native Binance Coins (BNB BEP-2). This means that the Coin Burn events now take place on the Binance Chain and not on the Ethereum network.

It is worth noting that all BNB ERC-20 coin burns were “replicated” on the Binance Chain, to ensure that the total supply is the same. In other words, the total 11,654,397 BNB ERC-20 tokens that were burned on the Ethereum network, were also burned on the Binance Chain, right after the mainnet launch. You can check this specific burning transaction on the Binance Chain Explorer. Also, the total supply of BNB is publicly available for anyone to see.

The current coin burn mechanism doesn’t rely on a smart contract anymore but on a specific command executed on the Binance Chain. You can find more details on the Binance Chain Docs page.

As of July 2019, Binance completed 8 BNB Coin Burn events. In total, 12,463,247 BNB coins were burned, reducing 6.23% of the Total Supply (now at 187,536,713).

Coin Burn BNB Burned BNB Price Approx. USD Value % of Total Supply

#1 (Oct 2017)

986,000

$1.52

$1,500,000

0.49%

#2 (Jan 2018)

1,821,586

$21.96

$40,000,000

0.91%

#3 (Apr 2018)

2,220,314

$13.52

$30,000,000

1.11%

#4 (Jul 2018)

2,528,767

$12.93

$32,700,000

1.26%

#5 (Oct 2018)

1,643,986

$10.34

$17,000,000

0.82%

#6 (Jan 2019)

1,623,818

$5.83

$9,400,000

0.81%

#7 (Apr 2019) 829,888 $18.79 $15,600,000 0.41%

#8 (July 2019)

808,888 $29.47 $23,800,000 0.43%
TOTAL

12,463,247

$170,000,000

6.23%

bitcoin private coin update

Coinburn was suggested in the whitepaper as a possible solution in the event BTCP suffers from an extremely low network hash rate due to the low amount of mineable coins remaining after the fork. As originally conceived, approximately 0.14% of all unmoved coins from the fork would be removed daily over the course of two years, thereby decreasing the circulating supply and freeing up a significant portion of the coins for miners.

However, on December 23, 2018, CoinMetrics released an article purporting a recent discovery concerning the Bitcoin Private fork. Per the report, an independent third-party technical audit uncovered that a large quantity of coins (approximately 2 million BTCP) were created during the fork-mine, and around 1.7 million of these coins are stored in a shielded pool while around 300,000 were moved out of it. The active contributors of BTCP immediately conducted their own investigation and confirmed the existence of said illegitimate coins. The active contributors and the community were confronted with two options. The first was to burn all the coins stored in shielded addresses since CoinMetrics reported that 1.7–1.8 million illegitimate coins are stored in shielded addresses while only 20,000 shielded coins are legitimate. The second was to burn all unmoved coins to fix the supply issue ( “Official Statement on CoinMetrics Report” dated 12/25/2018). After intense discussions among the active contributors and the community, it was decided to adopt a combination of both options. In order to recompense the owners of the 20,000 legitimate coins in shielded addresses that are subject of removal together with the illegitimate ones, a relief fund managed by a third party volunteer was proposed to be set up. Additionally, in order to avoid a chain split, the removal of unmoved coins will not be done slowly over 2 years but immediately and simultaneously at block height 480,000 (cf. Medium article entitled “Bitcoin Private Jan 2019 Hard Fork” dated 12/30/2018). Thus, on January 5, 2019, a hard fork at block height 455,500 occurred which effectively removed all coins in shielded addresses. Then around February 16/17, 2019, a coinburn involving all unmoved coins will happen at block height 480,000 ( article entitled “Bitcoin Private Post Jan 2019 Hard Fork Summary” dated January 9, 2019).

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