BNB

Transit Swap ‘hacker’ returns 70% of $23M in stolen funds

The funds returned so far have come in the form of Ether, Binance-pegged ETH and BNB ($14.2 million).

A quick response from a number of blockchain security companies has helped facilitate the return of around 70% of the $23 million exploit of decentralized exchange (DEX) aggregator Transit Swap.

The DEX aggregator lost the funds after a hacker exploited an internal bug on a swap contract on Oct. 1, leading to a quick response from the Transit Finance team along with security companies Peckshield, SlowMist, Bitrace and TokenPocket, who were able to quickly work out the hacker’s IP, email address and associated-on chain addresses.

It appears these efforts have already borne fruit, as less than 24 hours after the hack, Transit Finance noted that “with joint efforts of all parties,” the hacker has returned 70% of the stolen assets to two addresses, equating to roughly $16.2 million.

These funds came in the form of 3,180 Ether (ETH) at $4.2 million, 1,500 Binance-Peg ETH at $2 million and 50,000 BNB at $14.2 million, according to BscScan and EtherScan.

In the most recent update, Transit Finance stated that “the project team is rushing to collect the specific data of the stolen users and formulate a specific return plan” but also remains focused on retrieving the final 30% of stolen funds.

At present, the security companies and project teams of all parties are still continuing to track the hacking incident and communicate with the hacker through email and on-chain methods. The team will continue to work hard to recover more assets,” it said. 

Related: $160M stolen from crypto market maker Wintermute

Cybersecurity firm SlowMist in an analysis of the incident noted that the hacker used a vulnerability in Transit Swap’s smart contract code, which came directly from the transferFrom() function, which essentially allowed users’ tokens to be transferred directly to the exploiter’s address:

“The root cause of this attack is that the Transit Swap protocol does not strictly check the data passed in by the user during token swap, which leads to the issue of arbitrary external calls. The attacker exploited this arbitrary external call issue to steal the tokens approved by the user for Transit Swap.”

Here’s why Binance Chain (BNB) will face an important price test on September 30

BNB price has entered a symmetrical triangle formation, and the conflicting trends will decide the fate of the altcoin as it battles near $280.

BNB, the native token of Binance’s BNB Chain, entered a symmetrical triangle formation on Aug. 10, when it first faced the descending trendline at the $335 resistance. The following five weeks have been a struggle around $280, the exact intersection between the two conflicting ascending and descending patterns.

BNB token/USD at FTX. Source: TradingView

A decision on whether the symmetrical triangle will break to the upside or downside is expected by Sept. 30, when the trendlines cross. Currently holding a $45 billion total market capitalization, BNB Chain token has outperformed the broader altcoin market by 15% over the past three months.

The latest breakthrough in BNB Chain development was announced on Sept. 7, after the project introduced zero-knowledge (ZK) proof scaling privacy technology. The testnet is expected for November, aiming for faster finality and reduced transaction fees. Ethereum mastermind Vitalik Buterin also wants to implement a similar solution for the Ethereum network and he highlighted the importance of ZK in late 2021.

BNB Chain’s Ethereum-compatible network is fully functional, hosting decentralized applications (DApps), including decentralized exchanges (DEXs), games, collateralized loan services, social networks, yield aggregators and NFT marketplaces.

A decline in price deposits could be a red flag

Despite currently being 60% below its -time high, BNB remains the third largest cryptocurrency by market capitalization ranking, excluding stablecoins. Moreover, the network holds $6.6 billion worth of deposits locked on smart contracts, a term known as total value locked, in the industry.

Despite BNB price rallying 26.5% in the past 3 months, the network’s TVL measured in BNB tokens dropped by 12.5% in the same period. Usually, this data would be concerning, but it depends on how other competitors have fared.

BNB Chain Total Value Locked, BNB. Source: DefiLlama

In fact, lower smart contract deposits have been the norm across the industry. For example, Solana’s (SOL) TVL declined by 27.5% in 3 months, and Avalanche (AVAX) decreased by 36%. Even Ethereum saw a 29% cut in ETH deposits, down to 24.2 million from 34 million on July 17.

In dollar terms, BNB Chain’s current TVL of $6.6 billion gained 12% in the three months leading to Sept. 16. This figure is vastly superior to other Ethereum competitors, such Avalanche’s $2.2 billion or Solana’s $1.3 billion, according to data from DeFi Llama.

DApp use is on the rise, led by Gameta

To confirm whether BNB Chain’s TVL decline is accompanied by a reduction in users, investors should analyze decentralized application (DApp) usage metrics. Some DApps, such as games and collectibles, do not require large deposits, so the TVL metric is irrelevant in those cases.

Top BNB Chain DApps by active addresses in 30-days. Source: DappRadar

PancakeSwap, BNB Chain’s decentralized exchange, has 1.75 million active addresses, and is the absolute leader across all smart contract networks. Meanwhile, the Ethereum network only holds three DApps with more than 35,000 active addresses, namely Uniswap, OpeanSea and MetaMask Swap.

More importantly, three DApps using BNB Chain grew by 190% or higher, with Gameta being the most promising, with over 900,000 active addresses. BNB Chain critics will have a hard time if another application besides PancakeSwap consolidates its leadership across all smart contract networks.

Judging by the absolute numbers, meaning the 12.5% TVL decline in BNB tokens and the 14% reduction in active addresses on Binance Chain’s leading DApp, one could incorrectly conclude that BNB token is primed for a correction.

However, a more granular analysis, including a comparison with competitors, shows that the symmetrical triangle pattern crossing at $280 on Sept. 30 is likely a bullish trigger for BNB’s price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

What is BNB auto-burn and how does it work?

Based on the price of BNB and the number of blocks generated on BSC during the quarter, the BNB auto-burn mechanism automatically modifies the amount of BNB to be burned.

BNB and its role in the blockchain ecosystem

Binance Coin (BNB) is the Binance ecosystem’s native cryptocurrency. Launched in 2017, BNB was originally presented as an ERC-20 token on the Ethereum blockchain with a total supply of 200 million. In 2019, Binance started its mainnet swap and migrated all BNB tokens to BNB Chain.

Related: A beginner’s guide to the BNB Chain: The evolution of the Binance Smart Chain

BNB Chain is composed of two blockchains, both powered by BNB:

  • BNB Beacon Chain: Previously called Binance Chain, this blockchain handles BNB Chain governance functions such as voting and staking.
  • BNB Smart Chain (BSC): Once known as the Binance Smart Chain, this blockchain uses the Ethereum Virtual Machine to support smart contracts and is fully compatible with Ethereum’s tools and decentralized apps (DApps).

The native Binance Coin is now an essential part of the Binance ecosystem. It is used to power the operations of the Binance and Binance.US exchanges, including other applications built on the BNB Chain, such as:

  • PancakeSwap
  • Biswap
  • ApeSwap
  • Autoshark Finance
  • Avarice
  • Libera.Financial
  • Nominex/Nomiswap
  • The age of dinosaurs
  • DEX Finance
  • Open Leverage

These are just a few of the many dApps built on the BNB blockchain. Binance also remains the largest cryptocurrency exchange by trading volume and is one of the most popular exchanges in the world.

What is a coin burn?

A coin burn is when a cryptocurrency project destroys some of its coins, often to reduce the circulating supply and increase the value of the remaining coins. The coins are sent to a dead crypto wallet with an unknown private key, which means that these coins can never be spent again.

Coin burns are often conducted on a quarterly or semi-annual basis. Binance, for example, has committed to burning BNB coins every quarter until 100 million BNB are destroyed. This will leave a total supply of 100 million BNB — the maximum possible supply of BNB.

Related: Buyback-and-burn: What does it mean in crypto?

Blockchains and crypto protocols do periodic coin burns and token burns for a couple of reasons, including:

How is BNB burned?

There are coin-burning mechanisms by which BNB is burned, as explained below:

Real-time burning mechanism (BEP-95)

The first is the Binance Evolution Proposal (BEP)-95 burning mechanism. Through BEP-95, BNB is burned in real-time by burning a portion of the gas fees spent on BSC. Since the 2021 upgrade of the BNB Smart Chain, BEP-95 has continued to burn around 860 BNB daily.

Binance CEO Changpeng Zhao implemented BEP-95 to accelerate BNB’s burn rate, which was going slower than planned. By burning part of the gas fees collected by each block’s validators, BEP-95 provides a constant stream of BNB to be burned.

BEP-95 is completely reliant on the BSC network, so it will continue to burn BNB after the 100 million burn goal has been reached. BEP-95 burn progress can be tracked via the BNB Burns Tracker Bot on Twitter:

Quarterly auto-burn

The second method is the scheduled quarterly burns conducted by Binance. In these burns, a specific amount of BNB is bought back from the open market and destroyed. The first burn was conducted in October 2017 and burned 986,000 BNB.

The quarterly burns are conducted using Binance’s profits and are announced well in advance. The specific amount of BNB to be burned is based on several factors including overall profitability, BNB circulating supply and the number of blocks produced per quarter. As of the most recent burn in April 2022, a total of 1,839,786.261 BNB have been burned:

What is BNB auto-burn?

BNB auto-burn was created alongside the launch and rebranding of Binance Chain and Binance Smart Chain into BNB Chain. According to Binance, the auto-burn mechanism was designed to maximize the BNB token’s value and provide a sustainable and safe long-term growth plan for the BNB ecosystem.

Binance used to do quarterly BNB burns based on the BNB trading volume on their exchange. However, quarterly burns were replaced by BNB auto-burn in December 2021.

The auto-burns are still done quarterly, but they are no longer based solely on the trading volume on Binance.

The BNB auto-burn mechanism is automated to adjust the quantity of BNB that will need to be burned depending on two factors:

  • BNB price
  • Number of blocks generated on BSC per quarter

According to Binance, the new BNB burning mechanisms provide better transparency and are more predictable than the previous quarterly burn method. According to the Binance team, the new auto-burn mechanism will help stabilize the BNB price and protect it from large fluctuations.

How does BNB auto-burn work?

From a technical perspective, BNB auto-burn uses on-chain information from the BNB Smart Chain to calculate how much BNB should be burned. This is how the mechanism “adjusts” the burn amount.

The burn amount is also influenced by supply and demand dynamics, which means that when the price of BNB declines, the burn rate increases. As previously mentioned, coin burns increase a cryptocurrency’s value.

BNB auto-burn was designed to remain independent of BNB trading volume on Binance (which used to be its sole basis). This is to assure the BNB community that the process is verifiable, objective and transparent.

The goal is to continue running auto-burn until the 100 million mark. It will do so automatically using the formula below:

In the equation above, B represents the total amount of BNB to be burned and N represents the number of blocks produced on the BNB Smart Chain during the quarter. The average block time is 3 seconds, setting the approximate value of blocks produced per hour at 1,200 blocks. A standard computation would yield the value of N as approximately 2,592,000 blocks. The value may fluctuate depending on exactly how many days there are per month during a specific quarter.

P is for BNB’s average price at the time. The average price fluctuates within a range of 10% to 20% per day, and the median value is determined by taking a sample based on an accepted oracle provider, such as ChainLink, for BSC. This is typically carried out every 10,000 blocks and takes around 8.3 hours to produce.

K is initially set at 1000 and is a constant price anchor. Its value is subject to change and largely depends on BNB Smart Chain’s community. Members can submit a BEP proposal as well as cast a community vote to update this value.

BNB quarterly burn

The older quarterly burn mechanism was updated to quarterly auto-burns. Auto-burn achieves the same objective but is more efficient and transparent. The chart below shows the anticipated quarterly BNB auto-Burn amount for a variety of BNB average prices:

How to check BNB auto-burn history?

BNB auto-burn history can be tracked. The website keeps a record of all previous burns including details of each burn:

For example, if we click on the latest burn, Burn #19, we can see the following details:

So, how much BNB has been burned till now? To date, the total BNB burned is 35,750,684.88. Per current price data, this is equivalent to $7,866,304,917.03. You can also follow real-time values and details about BNB burning events.

When is the next BNB burn?

The latest BNB Burn took place on April 19, 2022, destroying 1,830,382 BNB, or $772,363,806, via auto-burn. There is no specific date yet for the 20th burn, but it is expected to happen anytime between July 16-20, 2022.

Typically, Binance CEO Changpeng Zhao announces BNB burn dates on Twitter, so it’s worth watching that space for updates on the next auto-burn.