Binance is well known as the largest cryptocurrency exchange . The Malta-based exchange offers a wide range of financial products and is also responsible for the Binance Chain , among other things .
In 2017, Binance also released its own cryptocurrency, Binance Coin (BNB) . BNB aims to offer users of the exchange several advantages at once and is now deeply integrated into the exchange ecosystem.
But what are the advantages in detail and what is the technical background of the BNB Binance Coin ? Let’s take a closer look at the characteristics and distinctive features of popular cryptocurrencies.
What is Binance Coin? – The essentials in brief
- BNB is the cryptocurrency from the ecosystem of the large crypto exchange Binance
- The Binance Coin can be used to reduce fees and for many other use cases
- The coin is a former ERC20 token and is now based on the Binance Smart Chain
- Every quarter, a certain percentage of BNB is destroyed in order to reduce the cryptocurrency supply in the long run
What problem does Binance Coin BNB solve?
Binance has a broad product portfolio and is now seen more as a DeFi platform and less as a classic trading venue.
It was clear to the founder of Binance, Changpeng “CZ” Zhao, early on that Binance would primarily be at home in the area of decentralized financial services in the future.
To that end, he wanted to create an ecosystem where holding an exchange-owned cryptocurrency would provide the user with some benefits. Shortly thereafter, the Binance Coin was finally launched.
Holders of this coin essentially benefit from the reduced fees incurred for trading on Binance. In this context, a tier-based system was created, which grants a certain discount on trading fees.
Users who buy BNB initially received a 50% discount in the first year. In the following years, the discount was halved by half. The coin was intended to bind users to the exchange, which gave Binance important competitive advantages in the competitive crypto exchange market.
There are now many more features for BNB. The deep integration into the ecosystem also enables investments on Binance’s new LaunchPad, for example.
There, BNB investors can invest in innovative projects on the Binance Chain, which collect liquidity as an Initial Exchange Offering (IEO). BNB can also be used as a trading pair for a variety of cryptocurrencies.
In summary, holding and using BNB is especially worthwhile for regular users of the exchange. At the same time, the Coin Burn makes BNB interesting for long-term investors – but more on that later.
Historical background of BNB
As previously mentioned, the Binance coin BNB was released practically at the same time as the exchange launched. In the form of an initial coin offering (ICO) , those responsible issued 200 million BNB to investors.
Of these, 20 million units went to Angel Investors, 80 million units remained in the stock of the exchange, and 100 million BNB went on public sale.
As part of the ICO, the BNB was issued at 15 cents per coin, which raised $15 million. Of this, Binance invested 35% in the further development of its platform, 50% went into branding and marketing and 15% ended up in an emergency reserve.
Since Binance did not have its own blockchain at the time of the ICO, BNB was based on the Ethereum blockchain. The coin was therefore a classic ERC20 token for some time until it was transferred to the Binance Smart Chain in April 2019.
The coin is not mined and is therefore “premined”. Technically, BNB is based on a Byzantine Fault Tolerance Algorithm (BFT). Also due to the constant burn of the coin, the price of the cryptocurrency has increased significantly in recent years.
Technical background and use cases of the Binance Coin
As mentioned, BNB was initially a token on the Ethereum blockchain. In 2019, the switch to the Binance Chain finally took place. The ERC20 token became a BEP2 coin with forced migration to the new Binance blockchain.
With the launch of the mainnet on April 18, 2021, there was a one-to-one exchange of the “old” BNB for the new format of the Binance Smart Chain – the successor to the Binance Chain. From then on, the standard changed from BEP2 (Binance Chain) to BEP20 (Binance Smart Chain).
The token standard created by Binance is similar to the well-known ERC20 format in many respects. BEP2 or BEP20 is also used to implement fungible tokens on the Binance Smart Chain (BSC).
BNB can be exchanged for many other cryptocurrencies on Binance and many other exchanges. Almost 20 trading pairs are currently available on Binance alone. This makes it much easier for users to trade on Binance and ties them to the exchange’s cryptocurrency.
Users who hold BNB on Binance and are in possession of the exchange’s official credit card receive attractive cashback conditions. If you have a BNB, you get 2% cashback on using the card.
At 10 BNB it is 3%, up to 600 BNB which finally grants 8%. In addition, the Binance Coin can also be used with the Crypto.com credit card, for example to pay any credit card fees that have arisen.
means of payment
Of course, the coin can also be easily used as a means of payment. For example, some travel providers have integrated BNB. Blockchain games such as VIBE, Steemmonster or Axie Infinity also use the cryptocurrency.
In addition, the Binance Coin is already being used in a wide variety of areas. Other traders who use the coin include Canya (job platform with payment in BNB), PureVPN (service provider for VPN servers) and Decentraland (auction platform for virtual goods).
It has now been mentioned several times and is certainly the biggest advantage for active Binance users: the fee savings. Those who pay their fees with BNB save 25% on spot trading fees, 25% on margin trading and 10% on futures trading fees.
On the Binance Smart Chain, investors have the opportunity to invest their BNB – i.e. to stake it. The BSC is also based on a modified form of Delegated Proof of Stake (DPoS) , such as that used by EOS .
The developers of the Binance Smart Chain introduced a Proof of Stakes Authority (PoSA), which allows stakers to vote for blockchain validators every 24 hours. The selected validators are responsible for the correct execution of the smart contracts and in return receive BNB as payment from the contract holders.
Binance Chain vs Binance Smart Chain
Newcomers to Binance in particular should quickly notice that there is always talk of two parallel blockchains. On the one hand the Binance Chain and on the other hand the Binance Smart Chain.
Since the Binance Coin plays a key role in both cases, it is advisable to take a closer look at the two blockchains.
The Binance Chain has existed since 2019 and is the basis of all Binance trading mechanisms. The decentralized exchange – Binance DEX – is also the most popular decentralized application of the Binance Chain.
Developers can also create their own tokens in the BEP standard, but this costs a fee of 1,000 BNB.
The Binance Smart Chain completes Binance’s dual chain system. The BSC is compatible with the Ethereum Virtual Machine (EVM), which makes it particularly easy to port existing smart contracts from Ethereum to the Binance Smart Chain. The aim of the second blockchain is to expand interoperability with other smart contract platforms.
At the same time, the BSC relieves the Binance Chain by outsourcing the complexity of developing and executing smart contracts. Both blockchains can still communicate with each other natively.
Why Binance BNB is burning
Anyone who takes a closer look at Binance and its own cryptocurrency will quickly see that the supply of the coin is regularly reduced. Every quarter, Binance burns a portion of the 200,000,000 BNB.
Binance destroyed BNB worth several hundred million US dollars. But why is this step taken? From the beginning, “CZ” wanted to continuously reduce the supply of its cryptocurrency. And so until 50 percent of all tokens have been burned.
For this purpose, a smart contract was set up that automatically carries out the “BNB Burn” once a quarter. Of course, the coins cannot be physically destroyed, so they end up on a so-called “eater address”.
This special address has no private keys and therefore nobody has access to the burned coins behind this address.
Originally, 20% of the quarterly profit was supposed to be burned in the form of BNB, but already in 2019 the percentage was increased to an unknown value.
Long-term investors in particular are hoping for a significant increase in the price of Binance Coins in the future due to the ever-decreasing supply.
Value Proposition: Why is BNB valuable
BNB is directly linked to the exchange founded in 2017. The cryptocurrency can be used for countless purposes and offers users many advantages.
Binance itself is one of the largest and most popular exchanges in the crypto world. For both beginners and advanced users, Binance offers a range of financial instruments that cater to all needs. The in-house coin is used in practically all areas of the stock exchange.
The value of the Binance Coin is therefore directly related to the success of the stock exchange. With steady adoption of Binance, the value of BNB grew exponentially.
Binance Coin is now one of the largest cryptocurrencies in the world in terms of market capitalization. So as long as Binance can maintain its leading position in the market, the more likely it is that the cryptocurrency will increase in value.
And the quarterly “BNB Burn” also helps in the long term to keep the value of Binance Coins increasing. Assuming Binance continues to be so successful, a steady reduction in supply should push the BNB price higher.
At the same time, it is important to observe how other smart contract platforms develop, because the success of the Binance Smart Chain and the associated utility token BNB depends on this.
Conclusion and Outlook: What is the Binance Coin (BNB)?
Virtually every trader in the crypto world has heard of major crypto exchange BInance. The Malta-based exchange quickly grew to become the market leader and created a comprehensive financial platform for cryptocurrencies and decentralized financial services.
The broad product portfolio and the complete fee structure of the platform is essentially based on a utility token – the Binance Coin. The cryptocurrency is the utility token of the exchange’s dual-chain system and can be used to reduce trading fees, for example.
The Binance Coin therefore gives users of the platform a lot of advantages. It is a utility token and means of payment in one and has recently seen an enormous increase in value.
On the one hand, this is due to the great success of Binance, but also to the constant reduction of the BNB offer. Since publication, the cryptocurrency has been burned regularly – also known as “BNB Burn” – and the supply is thus reduced. This was intended from the beginning and is intended to ensure the value of the coin.
In summary, the Binance Coin is closely tied to the success of the exchange due to its deep integration into the ecosystem. The increasing acceptance of cryptocurrencies and the ongoing developments in the field of decentralized financial services could also ensure that Binance can maintain its level of success in the long term.