Cryptocurrency has become an increasingly popular asset class in recent years, with more and more people looking to invest in digital assets like Bitcoin, Ethereum, and others. One cryptocurrency that has gained significant attention and adoption is Binance Coin (BNB), the utility token created by Binance – one of the largest cryptocurrency exchanges in the world.
BNB was initially launched as a way to provide discounts on trading fees for Binance users, but has since evolved into a versatile digital asset with a wide range of use cases beyond just the Binance exchange. In this article, we'll take a closer look at what Binance Coin (BNB) is, how it works, and whether it’s a good investment.
What Is Binance Coin (BNB)?
Binance Coin (BNB) is a digital asset that was created by Binance, one of the largest cryptocurrency exchanges in the world. The Binance exchange was founded in 2017 by Changpeng Zhao (also known as "CZ"), and quickly gained popularity among traders due to its user-friendly interface and low trading fees.
BNB was created as a utility token for the Binance exchange, and was initially launched as an ERC-20 token on the Ethereum blockchain. However, in 2019, Binance launched its own blockchain, the Binance Chain, and migrated BNB to this new blockchain. This allowed Binance to have more control over the token, and also enabled faster and cheaper transactions.
The main purpose of BNB is to provide discounts on trading fees for users of the Binance exchange. When users pay their trading fees with BNB, they can receive a discount of up to 25% on spot and margin trading fees. Futures traders save up to 10% on fees via BNB.
Additionally, Binance periodically uses a portion of its profits to buy back and "burn" (i.e., destroy) BNB tokens, which helps to reduce the total supply of BNB over time.
BNB has evolved beyond just a utility token for the Binance exchange. It has become a popular cryptocurrency in its own right, and is now used for a wide range of purposes beyond just trading fees.
For example, Binance has created a decentralized exchange (DEX) that runs on the Binance Chain, and BNB is used as the native token for this platform. Binance has also launched other products and services that utilize BNB, such as:
Binance Launchpad. A platform for launching new cryptocurrencies
Binance Smart Chain. A blockchain network with a rich DeFi ecosystem and smart contract functionality.
Binance NFT. A marketplace for buying and selling non-fungible tokens (NFTs).
BNB investors can also use the token to provide liquidity on Binance Liquid Swap, pay for transaction fees on Binance Smart Chain, pay for goods and services when using Binance Card, pay for trading fees on Binance DEX, and so on.
How Does Binance Coin Work?
Binance Coin (BNB) works as a utility token for the Binance exchange and a native token for the Binance Chain. It was initially created to provide discounts on trading fees for Binance users, but has since evolved into a versatile digital asset with a wide range of use cases.
As a utility token for the Binance exchange, BNB is used to pay for trading fees on the platform. When users pay their trading fees with BNB, they can receive a discount of up to 25%. This discount decreases over time, with the highest discount available in the first year of Binance's operation, and decreasing by half every year until the fifth year, after which the discount is no longer available. This incentivizes users to hold BNB and use it for trading on the platform.
Binance also periodically uses a portion of its profits to buy back and "burn" (i.e., destroy) BNB tokens. This reduces the total supply of BNB over time, which can help to increase its value over the long term.
In addition to its use as a utility token for the Binance exchange, BNB is also the native token for the Binance Chain. This means that it is used for transactions and smart contracts on the blockchain. Binance Chain is a high-speed blockchain platform that enables fast and secure transactions, and is designed to be scalable and interoperable with other blockchains.
Binance Chain also powers Binance DEX, a decentralized exchange that runs on the Binance Chain. Binance DEX enables peer-to-peer trading of cryptocurrencies without the need for a central authority or intermediary. BNB is used as the native token for Binance DEX, and is required for making trades, as well as for participating in the governance of the platform.
Finally, Binance has also launched other products and services that utilize BNB, such as Binance Launchpad (a platform for launching new blockchain projects), Binance Smart Chain (a blockchain platform that is compatible with the Ethereum Virtual Machine), and Binance NFT (a marketplace for buying and selling non-fungible tokens).
Overall, Binance Coin (BNB) works as a utility token for the Binance exchange and a native token for the Binance Chain. Its utility and versatility have helped to make it one of the most valuable cryptocurrencies in the world, with a wide range of use cases beyond just trading fee discounts.
Binance Coin (BNB) ICO
Binance launched BNB by holding an initial coin offering (ICO) in 2017. Half of the asset’s supply went to investors who participated in the ICO, while the other half went to angel investors and the founding team. The latter two had 20 million and 80 million BNB tokens respectively.
Binance sold a total of 100 million BNB tokens at a price of 15 cents per BNB. The exchange successfully raised $15 million in capital. The sale took place between June 26th 2017 and July 3rd 2017.
Binance used the funds to improve its exchange, distributing $15 million in the following fashion:
35% went towards upgrading the exchange
50% went towards marketing and branding
15% went towards a reserve dedicated for emergency situations
As previously mentioned, BNB launched as an ERC-20 token on the Ethereum network. Investors could buy 2,700 BNB for 1 ETH. With the launch of the Binance chain in April 2019, investors had the opportunity to perform a token swap (ERC-20 to BEP-2) at a 1:1 ratio.
At the end of each financial quarter, Binance uses a portion of its quarterly profits to market buy BNB — then burns it from the supply. This portion is calculated based on the price, supply, and demand of BNB. The point is to regulate the token supply and make it more scarce all while demand for the coin continues to surge.
With an increase in use cases and products around the Binance ecosystem, demand for BNB is at an all-time high, which is reflected by BNB’s steady rise in valuation.
Binance also has an auto-burner set in place. Governance improvement proposal BEP-95 introduced real-time BNB burns based on gas fees spent inside the BSC ecosystem. The burning mechanism ensures that BNB becomes increasingly more scarce and valuable.
Is Binance Coin (BNB) a Good Investment?
As with any investment, whether Binance Coin (BNB) is a good investment depends on a variety of factors, including market conditions, the performance of the Binance exchange, and the potential for growth and adoption of Binance products and services.
One factor that has contributed to the success of BNB is the popularity of the Binance exchange. As one of the largest and most trusted cryptocurrency exchanges in the world, Binance has a large user base and a strong track record of innovation and growth. This has helped to drive demand for BNB, as users seek to take advantage of the discounts on trading fees and other benefits of holding the token.
In addition, Binance has continued to expand its product offerings beyond just the exchange, with the launch of Binance DEX, Binance Launchpad, Binance Smart Chain, and other services that utilize BNB. This has helped to increase the utility and value of BNB, as it is required for transactions and other functions on these platforms.
However, it is important to note that investing in Binance Coin, like any cryptocurrency, carries significant risks. The cryptocurrency market is highly volatile and subject to rapid and unpredictable price swings, which can result in significant losses for investors. In addition, regulatory and security risks can also impact the value of Binance Coin and other cryptocurrencies.
It is also worth considering the potential for competition from other cryptocurrency exchanges and blockchain platforms, which could impact the growth and adoption of Binance products and services over the long term.
In summary, while Binance Coin has seen significant growth and adoption in recent years, investing in it carries significant risks and uncertainties. As with any investment, it is important to do your own research and carefully consider the risks and potential rewards before making any investment decisions.
Binance Coin (BNB) is crypto’s fourth largest cryptocurrency with a market cap of around $50 billion. The token is part of the Binance ecosystem. Holders primarily use BNB to enjoy lower trading fees. However, there are many other utilities that investors might be interested in.
The value of BNB is effectively tied to the performance of Binance as an exchange. More new users and higher trading volume can have a significantly positive factor on the token’s price. Factors such as overall crypto market conditions also have an effect on the token’s perceived value.
As part of the world’s largest crypto exchange, Binance Coin is certainly a cryptocurrency to monitor and compare against other altcoins. However, increased regulatory scrutiny on Binance and its operations carries increased risks for any potential buyer.
About The Author:
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.
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