Yesterday, another fifteenth quarterly burning of the native token of the Binance exchange called BNB took place. According to platform representatives, the cryptocurrency exchange burned about $ 600 million worth of Binance Coin.
Historically, the marketplace has burned about 20 percent of its revenue. And although there is still not much information regarding the last burn, according to rough estimates, we can already conclude about the profit of the largest cryptocurrency exchange in the first quarter of 2021. Let’s talk about this in more detail.
Recall that the burning procedure means the redemption of a certain amount of cryptocurrency – in this case, the exchange – and sending it to an address that cannot be accessed. This is done to reduce the supply of coins in circulation and increase the value of the remaining cryptocurrency. Nevertheless, since there is less of it in circulation, it means that the coins in stock become a little more rare.
This time, the exchange burned 1.09 million BNB worth $ 595 million. The amount of burning in tokens itself was not the maximum, but the dollar equivalent became a record one.
This is due to a serious increase in the price of Binance Coin, which set a record at $ 610 on April 12.
Since the volume of burn is directly related to the earnings of the platform, the event helped make a guess about the financial results of the exchange. They have not been officially announced yet.
Why Binance Coin BNB has grown
According to Sam Bankman-Fried, CEO of another major FTX exchange, Binance’s revenue in the first quarter is about $ 1 billion. For comparison: the total income of the largest American exchange Coinbase, which recently went public, for its entire existence is estimated at between $ 780 million and $ 1.3 billion, according to Cointelegraph.
While Binance has burned 20 percent of profits in the past, it is possible that the marketplace burned up as much as 80 percent this time. With this fact in mind, Bankman-Fried stated that burning $ 600 million at BNB could equal approximately $ 750 million in profits for the exchange as a whole.
Here is his quote, in which the entrepreneur shared an analysis of what is happening.
Based on the original specs, BNB burned 20 percent of the profits. Perhaps that figure has now risen to 80 percent – a maximum of 100 million tokens. Binance burned $ 600 million BNB in the first quarter. This roughly means that the company’s profit has reached $ 750 million. If we assume total revenues of $ 1 billion, taking into account the $ 6 trillion in deal volume in the first quarter, this would mean the average commission rate for trades on Binance is about 0.016 percent.
Since March 27, the price of BNB has risen 180 percent from $ 233 to $ 610. This rally has narrowed the gap between BNB and ETH, with Binance Coin now caping over a third of Ethereum’s market cap.
For clarity, here is a graph comparing the scale of quarterly BNB burns by the Binance exchange. Yesterday’s time stands out seriously against the background of the previous ones.
BNB’s strong uptrend has been driven by the high popularity of the Binance exchange, as well as the rapid development of the Binance Smart Chain ecosystem, a smart contract-enabled chain that powers various decentralized finance projects.
Moreover, their use is much cheaper in comparison with Ethereum. If on the ETH network you need to pay from 50-60 dollars for a swap now, then it will take less than a dollar for BSC.
Binance Smart Chain has seen a significant increase in daily transaction volume in recent months. According to the BSCScan blockchain observer, the daily number of transactions on the BSC network has grown from 380 thousand at the end of January to more than 4.7 million as of Friday. This means that users are gradually switching to using this network due to its available transactions.
Many analysts believe that the BSC ecosystem can compete with Ethereum for the right to be considered the main platform of the sphere of decentralized finance or DeFi. However, there are also many critics of BSC: it is reproached for excessive centralization, which contradicts the basic principles of the crypto market.
We believe that what is happening once again confirms the positive in the cryptocurrency market. Yet exchanges are making record-breaking amounts and conducting similar burns. This means that they are used more actively than ever – and this proves the incredible popularity of the blockchain asset industry. Judging by the situation, it is still far from the maximum.
