On January 18th, the official announcement of Coin An announced the completion of the destruction of BNBs in the fourth quarter of 2019. According to Coin An's announcement, nearly 2
On January 18th, the official announcement of Coin An announced the completion of the destruction of BNBs in the fourth quarter of 2019. According to Coin An's announcement, nearly 2.2 million BNBs (2216888 BNBs) were destroyed, valued at approximately $38.8 million.
Given that Coin An previously mentioned in BNB's white paper that the value of destroying BNB on a quarterly basis is 20% of the quarter's net profit, the data of "38.8 million US dollars" has been interpreted by multiple market analysis institutions as Coin An achieving a net profit of 194 million US dollars in the fourth quarter of 2019. However, is this really the case?
Larry Cermak, Director of Research at TheBlock, tweeted today: "Almost no one knows one thing - Coin An modified its white paper last summer, and BNB's destruction is no longer based on quarterly net profit. All market analyses (such as Arca and Messari) are inaccurate, but Zhao Changpeng is happy to forward these analyses. In fact, BNB's quarterly destruction is now based on Coin An's trading volume data
Daily Planet: Larry Cermak pointed out that the modification of the white paper occurred in the second quarter of 2019. According to the screenshot provided, Coin An did delete the phrase "will use 20% of the quarterly net profit to repurchase BNB and destroy it" in the BNB destruction plan, and instead described it as "BNB destruction will be based on the transaction volume data of the Coin Trading Platform".
Larry claimed that Zhao Changpeng told him at the time, "We deleted the description of profits because some regions tend to associate profits with securities, and we hope to separate BNB from securities. Therefore, we plan to use this new method to describe BNB's destruction method
According to Zhao Changpeng's explanation, the modification of BNB's destruction method by Coin An is due to regulatory considerations. However, the new destruction method seems to be not transparent enough, in Larry's original words - "They can burn whatever they want.
Larry pointed out that in Q4 2019, the value of BNB destroyed by Coin An reached the second highest record since Q4 2017. However, this number is interesting because while BNB's destruction of data has increased, the trading volume for the quarter has actually decreased.
For example, in Q2 2019, Coin An destroyed a total of $23.84 million worth of BNBs, while the transaction volume for the same quarter was $151.7 billion. In Q4 2019, the trading volume of Coin An decreased by 47%, while the value of destroyed BNBs increased by over 60%. The following figure calculates the ratio between BNB destruction value and spot trading volume in each quarter of Coin An, and the changes are obvious.
Some views suggest that the changes in data can be attributed to the futures trading market launched by Coin An thereafter. Larry Cermak explained that this theory also does not hold true.
Comparing spot trading volume with futures trading volume is almost meaningless... Futures provide high leverage trading, which can be clearly demonstrated in trading volume. Most importantly, the transaction fees for futures trading are 3-4 times lower than those for spot trading. Therefore, attributing the fluctuations in the above ratios to 'Coin An earns more money from futures trading' makes no sense. Spot trading may still contribute more than 80% of Coin An's revenue. Coin An's Q4 profit cannot be higher than Q2's
Larry finally said, "My theory is that Coin An only chose to destroy more BNBs on their own. The more they destroy, the more headlines will be made, and the more people will think that Coin An's performance in the fourth quarter was really good. But if you look at all the data, you will realize that this is impossible
All exchanges struggled in the fourth quarter, and Coin An was no exception. No matter how many BNBs they destroyed, Coin An is a very successful company, but it is not as successful as people imagine
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