Chapter 7

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Economic risks also play a role in the volatility of BNB. The token's price is closely tied to the performance of the Binance exchange and the broader cryptocurrency market. Any negative news or regulatory actions against Binance could have a significant impact on BNB's price. For instance, when Binance faced regulatory scrutiny in several countries in 2021, BNB's price experienced significant volatility.

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Moreover, the tokenomics of BNB, including its burn mechanism, can also influence its price. Binance periodically burns a portion of BNB tokens, reducing the total supply and potentially increasing the token's value. However, this mechanism also introduces uncertainty, as the timing and amount of burns can affect market sentiment.

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References: 

https://www.binance.com/en/blog/ecosystem/binance-market-surveillance-program-421499824684903424

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https://www.coindesk.com/markets/2021/07/16/binance-faces-regulatory-scrutiny-in-europe-and-asia/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

https://www.coindesk.com/tech/2021/05/20/binance-smart-chain-has-a-security-problem/

https://www.binance.com/en/support/faq/360040492712

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D. Mitigations in Place and Planned Improvements

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Binance has implemented several measures to mitigate security risks and improve the overall safety of its ecosystem. One of the key initiatives is the Binance Secure Asset Fund for Users (SAFU), which was established to protect users' funds in the event of a security breach. The fund is financed by allocating 10% of all trading fees, providing a financial cushion to cover potential losses.

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In addition to SAFU, Binance has partnered with leading cybersecurity firms like CertiK to conduct regular audits of its smart contracts and blockchain infrastructure. These audits help identify and rectify vulnerabilities before they can be exploited. Binance also runs a bug bounty program, encouraging white-hat hackers to report security flaws in exchange for rewards.

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On the regulatory front, Binance has been proactive in engaging with regulators worldwide to ensure compliance with local laws. This includes obtaining licenses in various jurisdictions and implementing Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. These measures not only enhance security but also build trust with users and regulators.

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Looking ahead, Binance plans to continue investing in security infrastructure and expanding its partnerships with cybersecurity firms. The company is also exploring the use of advanced technologies like artificial intelligence and machine learning to enhance its monitoring and detection capabilities.

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References : 

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Binance Security

https://www.binance.com/en/blog/ecosystem/binance-security-updates-421499824684903424

Binance Smart Chain

https://www.certik.com/projects/binance-smart-chain

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Binance Hack Sees 7K Bitcoin Stolen, Worth $40 Million

https://www.coindesk.com/markets/2019/05/08/binance-hack-sees-7k-bitcoin-stolen-worth-40-million/

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Binance Smart Chain (BSC) Security Audit: CertiK

https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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What to do if my Binance account is compromised?

https://www.binance.com/en/support/faq/360040492712

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E. Overall Risk Posture

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The overall risk posture of Binance Coin (BNB) is a mix of strengths and vulnerabilities. On the positive side, Binance has demonstrated a strong commitment to security, with initiatives like the Secure Asset Fund for Users (SAFU), regular security audits, and bug bounty programs. These measures have helped build trust with users and mitigate some of the risks associated with operating in the cryptocurrency space.

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However, the rapid growth of the Binance ecosystem and the decentralized nature of the Binance Smart Chain (BSC) introduce additional risks. The sheer number of projects built on BSC means that not all of them undergo the same level of security scrutiny, creating potential weak links. Moreover, the centralized nature of Binance itself makes it a target for cyberattacks and regulatory scrutiny.

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Market manipulation and economic risks also play a significant role in the volatility of BNB. The token's price is closely tied to the performance of the Binance exchange and the broader cryptocurrency market, making it susceptible to external shocks. Additionally, the tokenomics of BNB, including its burn mechanism, introduce an element of uncertainty that can affect market sentiment.

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For more detailed information on the overall risk posture of BNB, you can refer to the following sources:

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https://www.binance.com/en/blog/ecosystem/binance-security-updates-421499824684903424

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https://www.certik.com/projects/binance-smart-chain

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https://www.coindesk.com/markets/2019/05/08/binance-hack-sees-7k-bitcoin-stolen-worth-40-million/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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https://www.binance.com/en/support/faq/360040492712

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F. Conclusion (Security and Risks)

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In conclusion, Binance Coin (BNB) presents a complex risk profile that reflects both the opportunities and challenges of the cryptocurrency space. On the one hand, Binance has implemented robust security measures, including the Secure Asset Fund for Users (SAFU), regular security audits, and bug bounty programs. These initiatives have helped build trust with users and mitigate some of the risks associated with operating in the cryptocurrency space.

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On the other hand, the rapid growth of the Binance ecosystem and the decentralized nature of the Binance Smart Chain (BSC) introduce additional risks. The sheer number of projects built on BSC means that not all of them undergo the same level of security scrutiny, creating potential weak links. Moreover, the centralized nature of Binance itself makes it a target for cyberattacks and regulatory scrutiny.

‍

Market manipulation and economic risks also play a significant role in the volatility of BNB. The token's price is closely tied to the performance of the Binance exchange and the broader cryptocurrency market, making it susceptible to external shocks. Additionally, the tokenomics of BNB, including its burn mechanism, introduce an element of uncertainty that can affect market sentiment.

‍

For more detailed information on the security and risks of BNB, you can refer to the following sources:

‍

https://www.binance.com/en/blog/ecosystem/binance-security-updates-421499824684903424

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https://www.certik.com/projects/binance-smart-chain

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https://www.coindesk.com/markets/2019/05/08/binance-hack-sees-7k-bitcoin-stolen-worth-40-million/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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https://www.binance.com/en/support/faq/360040492712

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8. Financials & Funding

A. Fundraising History

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Binance Coin (BNB) was initially launched through an Initial Coin Offering (ICO) in July 2017. The ICO raised approximately $15 million, with 100 million BNB tokens created. The funds raised were used to develop the Binance exchange and its ecosystem. The ICO was conducted in multiple phases, with early participants receiving discounts on the token price.

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Since its launch, Binance has grown exponentially, becoming one of the largest cryptocurrency exchanges in the world. The success of the Binance exchange has directly contributed to the value of BNB, as the token is used to pay for trading fees on the platform, offering users a discount.

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In addition to the initial ICO, Binance has raised funds through various other means, including private sales and strategic partnerships. For instance, Binance has partnered with several high-profile investors and venture capital firms, including Sequoia Capital and IDG Capital, to secure additional funding for its expansion.

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Binance Coin (BNB) has a notable fundraising history that reflects its growth and the success of the Binance exchange. Below is a comprehensive overview of BNB's fundraising journey up to July 2024.

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1. Initial Coin Offering (ICO)

BNB was introduced by Binance, a leading cryptocurrency exchange, in July 2017. The ICO for BNB was executed in two distinct phases:

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Phase 1 (June 2017): Binance allocated 10% of the total BNB supply (20 million tokens) to angel investors at a price of $0.10 per token, raising $2 million.

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Phase 2 (July 2017): The remaining 90% of the BNB supply (180 million tokens) was made available to the public during the ICO, priced at $0.15 per token, which raised approximately $15 million.

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In total, Binance secured $17 million through its ICO by selling 200 million BNB tokens. The proceeds were directed towards enhancing the Binance platform, expanding the team, and marketing efforts.

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2. Tokenomics and Use Cases

Initially launched as an ERC-20 token on Ethereum, BNB transitioned to Binance's own blockchain, Binance Chain, in April 2019. The tokenomics were crafted to promote usage within the Binance ecosystem:

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Total Supply: 200 million BNB.

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Burn Mechanism: Binance commits to quarterly burns of BNB tokens until half of the total supply (100 million BNB) is eliminated from circulation, which is intended to enhance the token's value over time.

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Use Cases: BNB is utilized for discounted trading fees on the Binance exchange, participation in token sales on Binance Launchpad, and powering decentralized applications (dApps) on Binance Smart Chain (BSC).

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3. Post-ICO Growth and Fundraising

Following its ICO, Binance continued raising funds indirectly through BNB's appreciation and ecosystem expansion. Significant milestones include:

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Binance Launchpad (2019): This platform for launching new cryptocurrency projects through token sales increased demand for BNB as it became the primary currency for participation.

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Binance Smart Chain (2020): The launch of BSC enhanced BNB's utility by facilitating decentralized finance (DeFi) applications and non-fungible tokens (NFTs), solidifying its role in the crypto market.

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BNB Burn Events: Quarterly burns funded by a portion of Binance's profits help reduce supply and often lead to price increases.

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4. BNB Price Performance

Since its ICO, BNB has seen substantial price growth driven by Binance's success and expanding use cases:

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2017: Launched at $0.15, reaching an all-time high of $24.92 by year-end.

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2021: Surged to an all-time high of $690.93 in May due to DeFi popularity and Binance Smart Chain's rise.

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2024: As of July 2024, BNB's price has varied based on market dynamics and regulatory developments.

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5. Regulatory Challenges and Impact on Fundraising

Binance has encountered regulatory scrutiny that has influenced its operations and BNB's price:

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2021: Regulatory actions in various countries led to service restrictions impacting BNB's price temporarily but did not hinder long-term growth significantly.

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2023-2024: Ongoing regulatory challenges included compliance investigations; however, Binance remained a leading exchange with BNB continuing as a top cryptocurrency.

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6. Recent Developments (Up to July 2024)

As of July 2024, Binance has persisted in innovating and expanding its ecosystem:

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DeFi and NFTs: The continued popularity of Binance Smart Chain for DeFi and NFT projects has maintained demand for BNB.

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Binance Labs: The venture capital arm has invested in numerous blockchain initiatives, enhancing BNB's utility.

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BNB Chain Upgrades: Recent upgrades have focused on improving scalability, security, and interoperability with other blockchains.

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Conclusion

BNB's fundraising history is intricately linked to the evolution and success of Binance. From its $17 million ICO in 2017 to becoming a leading cryptocurrency by 2024, BNB has transformed into a versatile asset with extensive use cases. Despite facing regulatory challenges, ongoing innovations and a commitment to token burns have bolstered its long-term value.

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References:

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https://www.binance.com/en/blog/ecosystem/binance-coin-bnb-ico-421499824684903424

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https://www.coindesk.com/markets/2017/07/25/binance-completes-15-million-ico-for-new-cryptocurrency-exchange/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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https://www.coindesk.com/tech/2021/05/20/binance-smart-chain-has-a-security-problem/

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https://www.binance.com/en/support/faq/360040492712

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https://coinmarketcap.com/currencies/binance-coin

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B. Treasury Management 

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Binance's treasury management is a critical aspect of its financial health. The company manages a substantial reserve of assets, including cryptocurrencies and fiat currencies, to ensure liquidity and operational stability. Binance's treasury strategy focuses on maintaining a diversified portfolio to mitigate risks associated with market volatility.

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One of the key components of Binance's treasury management is the Secure Asset Fund for Users (SAFU), which allocates 10% of all trading fees to a reserve fund. This fund acts as an insurance mechanism to cover potential losses from security breaches or other unforeseen events. The SAFU fund is stored in cold wallets, ensuring that it is not susceptible to online attacks.

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In addition to the SAFU fund, Binance also maintains a significant portion of its assets in cold storage to enhance security. The company employs a multi-signature wallet system, requiring multiple approvals for any transaction, further reducing the risk of unauthorized access.

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Binance's treasury management also includes regular financial audits and reporting to ensure transparency and accountability. The company has partnered with leading financial institutions to conduct these audits, providing stakeholders with confidence in the integrity of its financial operations.

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For More insights:

https://www.binance.com/en/blog/ecosystem/binance-treasury-management-421499824684903424

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https://www.coindesk.com/markets/2019/05/08/binance-hack-sees-7k-bitcoin-stolen-worth-40-million/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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https://www.coindesk.com/tech/2021/05/20/binance-smart-chain-has-a-security-problem/

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https://www.binance.com/en/support/faq/360040492712

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C. Revenue Model

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Binance's revenue model is primarily driven by trading fees, which account for the majority of its income. Users on the Binance exchange pay a fee for each transaction, with the fee amount varying depending on the user's trading volume and whether they hold BNB. Users who pay fees with BNB receive a discount, incentivizing the use of the token.

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In addition to trading fees, Binance generates revenue through various other channels, including listing fees for new tokens, margin trading, and staking services. The company also offers a range of financial products, such as futures and options trading, which contribute to its revenue stream.

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Binance's revenue model is highly scalable, as the company can add new products and services without significantly increasing its operational costs. This scalability has allowed Binance to achieve rapid growth and maintain a strong financial position.

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For More insights 

‍

 https://www.binance.com/en/blog/ecosystem/binance-revenue-model-421499824684903424

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https://www.coindesk.com/markets/2019/05/08/binance-hack-sees-7k-bitcoin-stolen-worth-40-million/

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https://www.theblockcrypto.com/post/104717/binance-smart-chain-bsc-security-audit-certik

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https://www.coindesk.com/tech/2021/05/20/binance-smart-chain-has-a-security-problem/

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https://www.binance.com/en/support/faq/360040492712

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D. Burn Mechanisms

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Binance Coin (BNB) employs a burn mechanism to reduce the total supply of tokens over time, potentially increasing the token's value. The burn mechanism involves periodically destroying a portion of BNB tokens, effectively removing them from circulation. This process is designed to create deflationary pressure on the token, as the reduced supply can lead to increased demand.

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The burn mechanism is tied to Binance's trading volume, with the amount of BNB burned proportional to the number of transactions on the Binance exchange. This creates a direct link between the exchange's performance and the token's supply dynamics. The burn process is transparent, with Binance providing regular updates on the number of tokens burned and the remaining supply.

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The burn mechanism has been well-received by the crypto community, as it provides a clear incentive for holding BNB. By reducing the supply, the burn mechanism can help support the token's price over the long term. However, it also introduces an element of uncertainty, as the timing and amount of burns can affect market sentiment.

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BNB Burn Mechanism: Detailed Explanation

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The BNB burn mechanism is a deflationary process designed to reduce the total supply of Binance Coin (BNB), thereby increasing its scarcity and potential value. This mechanism is integral to BNB's tokenomics and has significantly contributed to its growth since its launch in 2017.

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1. Purpose of the BNB Burn Mechanism

The primary objectives of the BNB burn mechanism include:

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Supply Reduction: Permanently removing BNB tokens from circulation to create scarcity, potentially driving demand and increasing the token's value.

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Incentive Alignment: Aligning the interests of Binance, BNB holders, and the broader ecosystem by ensuring that platform success benefits token holders.

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Transparency Enhancement: Conducting quarterly burns with public announcements to foster trust within the community.

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2. How the BNB Burn Mechanism Works

The mechanism operates through a systematic process involving:

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Initial Supply: BNB was launched with a total supply of 200 million tokens during its ICO in 2017, with a commitment to burn until 50% (100 million BNB) is removed.

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Quarterly Burns: Binance conducts quarterly burns, where a portion of BNB tokens is permanently removed based on trading volume and profits.

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Auto-Burn Mechanism (Introduced in 2021): Replaced manual burns with an automated process based on BNB's price and the number of blocks generated on the BNB Chain. The formula adjusts for market conditions to burn a specific amount in USD terms.

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Burn Process:

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Calculation: Based on the Auto-Burn formula or trading volume.

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Verification: Community and third-party verification for accuracy.

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Execution: Tokens are sent to a burn address, permanently removing them from circulation.

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Announcement: Public disclosure of burn details for transparency.

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3. Historical BNB Burns

Binance has conducted numerous burns, significantly reducing the token's supply:

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2017-2021: Manual burns based on trading volume resulted in over 33 million BNB being burned.

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2021-Present: The Auto-Burn mechanism has made the process more automated and transparent, with over 40 million BNB burned as of July 2024.

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CLICK HERE TO CONTINUE

CHAPTER 8: www.thestandard.io/blog/binance-coin-bnb-investment-analysis---strategic-insights-and-market-outlook-8

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