Binance Issues Risk Warning on IOTA, Highlights Tokenomics Changes

• Binance issued a risk warning regarding the IOTA tokenomics changes, clarifying its neutral stance on the updates and highlighting the potential risks of a price drop.
• The IOTA Rebased update will shift the network to an object-based design running on the Move Virtual Machine (MoveVM), enabling advanced programmability and integration of EVM.

The circulating and total supply of IOTA tokens is expected to increase under the newly proposed “IOTA Rebased” protocol. The advanced protocol comes with staking rewards, validator incentives, and nominal transaction fees. Thus, Binance has issued a risk warning on the tokenomics changes. The exchange explained its role in the sharing of the update and potential regulatory actions, as reported by CNF. 

The new protocol will bring an annual inflation rate of 6%, which amounts to 767,000 IOTAs minted per epoch. Validators and delegators will receive those newly minted tokens as staking rewards. A validator will have to stake at least 2 million IOTAs. In the beginning, the network will support up to 150 validator seats, and governance mechanisms will be in place to adjust this cap if needed.

The fees on transactions, which were previously absent in IOTA’s network, are now nominal. The average transaction will cost about 0.005 IOTAs. These fees will be burned to counter inflation and create deflationary pressure on the token supply.

Binance’s Take On IOTA Rebased

In a recent notice, Binance clarified its neutral stance on IOTA’s proposed changes but continued earning the users. The exchange stated, “The mere act of Binance posting the change of tokenomics requested by the project team on the website does not imply approval or authorization of its changes.”

The exchange also highlighted that it does not verify the authenticity of data provided by the IOTA team and encouraged users to refer to the project team directly for further details. Nonetheless, Binance posted a risk warning pop-up on the trading page as a supply increase could bring the IOTA price down.

However, on the contrary, owing to the hype around Rebased launch, the IOTA price gained 7.94% to $0.3221 on Tuesday, December 24.

Key Features Of the Rebased Protocol

The IOTA Rebased proposal is a transformation of the underlying architecture of the network, shifting from the UTXO model to an object-based design that runs on the Move Virtual Machine, or MoveVM. This update will support advanced programmability, including resource-oriented programming, static verification, and formal contract validation. This will open up new applications in finance and supply chain management.

Another critical feature is the incorporation of the Ethereum Virtual Machine (EVM) in the Layer 1 network. This will make improved security and decentralization possible for the existing dApps while promoting network activity. Higher levels of activity would increase the number of tokens burned, furthering the deflationary tokenomics.

With a projected throughput of more than 50,000 TPS and a finality time of less than 500 milliseconds, the proposal aims to solve the problems of scalability and performance. The initiative also encompasses new tools like a browser-based wallet extension, an updated Ledger app, and a redesigned explorer. It will facilitate the transition from the current Stardust protocol.

Earlier, IOTA launched a public testnet to test the proposed changes. Thereafter, they conducted governance voting, which resulted in their favor. Now, IOTA Rebased is tentatively scheduled to launch on the mainnet in early 2025.