Binance Burns as Many BNB Tokens as Hacker Minted From Thin Air

With the completion of its 21st quarterly burn of BNB tokens today, Binance has effectively made up for the losses it experienced in the bridge hack last week.

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Tokenized in the BNB coin, the Binance Smart Chain (previously BNB Chain) is an alternative to Ethereum. In order to combat inflation, cryptocurrency projects will sometimes “burn” tokens from circulation. The amount of BNB burned today equals roughly $549 million at the current exchange rate.

Contrast this with a week ago, when an exploit on the BNB Chain bridge netted the attacker exactly 2,000,000 BNB, created out of thin air using fake withdrawal proofs. The stolen BNB had a total value of about $566 million at the time it was taken.

When BSC chain validators shut down the network after the attack, the hacker lost most of his currency. Even if a hard fork was performed by the network to fix some of the problems, the hacker was still able to transfer around $100 million to other chains.

Although there was no actual loss of funds for any users, BNB is a deflationary token and hence should not be minted with new coins. The on-chain feature that burns a portion of BNB transaction fees in real-time helps achieve this goal, as do Binance’s quarterly BNB buybacks.

Prior to the switch to a “auto-burn” methodology, quarterly burns were calculated using Binance’s profits from BNB trading on its exchange. Based on the quarterly number of BNB chain blocks and the price of BNB, the calculation determines the amount of BNB to burn. In general, more BNB will be burned each quarter the higher the current price of the coin is.

In July, Binance burned 1.96 million tokens, at a value of $444.6 million.

The Luna Classic tokens (LUNC) are being burned by Binance in a manner similar to its prior quarterly burn mechanism. It uses the transaction fees generated by trading LUNC to repurchase the token on the open market.