Binance Coin

What is Binance Coin?

Binance Coin initially ran on the ERC 20 standard Ethereum blockchain but later became the native coin of Binance Chain. It launched in July 2017 during an initial coin offering (ICO) with a strict limit of a maximum of 200 million BNB tokens. It is offering 10%, or 20 million BNB tokens, to angel investors, 40%, or 80 million tokens, to the founding team, and the remaining 50%, or 100 million, to various participants through the ICO process. Nearly half of the funds raised during the ICO process were used for Binance branding and marketing, while approximately one-third was used to build the Binance platform and make necessary upgrades to the Binance ecosystem.

The Origin of Binance Coin

Binance Coin plays an important role in the Binance ecosystem by powering operations. The token is designed to cover listing, exchange and trading fees, as well as any other fees incurred by users on the Binance cryptocurrency exchange.

Initially, the total supply of Binance Coin will be 200 million tokens. During the Binance ICO, half of the coins (100 million) were allocated to the public, 80 million were reserved for the Binance brand, and the remaining 20 million were allocated to angel investors.

Binance Coin was originally issued as an ERC-20 token on the Ethereum blockchain. In 2019, Binance launched the Binance Chain blockchain, now known as the BNB Beacon Chain. The BEP-2 BNB token was introduced as the chain’s native token, and users of the old ERC-20 compliant BNB token exchanged them for the new token at a 1:1 ratio.

In 2021, the Ethereum blockchain network experienced high traffic congestion and transaction fees skyrocketed. Due to slow blockchain speed, developers face transaction issues. Therefore, they switched to using the BNB Beacon Chain because of its fast transaction processing and cheaper gas fees. Binance Coin is growing in popularity as usage of the BNB Beacon Chain increases. Since then, Binance’s role has grown beyond just a digital asset exchange, and BNB remains an integral part of the Binance ecosystem.

How does Binance Coin Work?

BNB is a cryptoasset similar to other digital assets on the market in that its value rises and falls as people use and trade it. People can hold BNB in compatible wallets on cryptocurrency exchanges and send the coins directly to others for payments or other activities.

There are a number of ways people can buy BNB, such as Binance’s own cryptocurrency exchange. However, as always, be sure to research and comply with applicable governing laws.

On a technical level, Binance’s layer-1 blockchains were merged to form BNB Chain (previously Binance Smart Chain and Binance Chain).

When building the BNB chain, Binance tailored the blockchain for on-chain transactions to achieve optimal performance on this newly formed chain based on Binance DEX, Binance’s decentralized exchange. Additionally, Binance Chain trading is powered by Binance Coin.

The BNB chain consists of the BNB beacon chain and the BNB smart chain. The former focuses on BNB Chain governance that allows BNB holders to participate in staking and voting. The latter is a consensus layer that is compatible with the Ethereum Virtual Machine and has a hub for multiple chains.

Uses of Binance Coin

Binance Coin usage has been consistent with Binance’s growth. The asset was originally created as a vehicle to raise funds for the Binance exchange. Since its launch in 2017, Binance has quickly gained traction as a cryptocurrency exchange, evolving from a trading platform into an ecosystem under the Binance brand. Over the years, Binance has launched a DEX, two blockchains, a peer-to-peer (P2P) crypto trading option, a crypto lending option, and more. BNB’s growth coincides with Binance’s expansion.

Users can use BNB coins to pay transaction fees on the Binance exchange. Binance Coin has historically been a fee-reduction option for the Binance cryptocurrency exchange, with customers of the exchange paying lower fees by holding BNB and paying platform fees in BNB. Binance is extending the right to receive a 25% trading fee reduction when paying with BNB until July 13, 2022 at 11:59:59 PM UTC. At the same time, BNB has also become an integral part of Binance’s other products.

Additionally, merchants can accept BNB as a payment method, providing customers with more payment options. BNB is also used in the entertainment industry for a variety of purposes, from paying for virtual gifts to purchasing lottery tickets.

Binance Coin can be used to invest in stocks, exchange-traded funds (ETFs), and other assets on various platforms. On some platforms, BNB can be used as collateral for loans. Some apps allow users to share expenses with friends and family using Binance Coin.

Advantages of Binance Coin

• The main advantage of Binance Coin is that it can be traded at a discount on the Binance platform. You can use BNB to pay for other functions on Binance Chain (BC) and Binance Smart Chain (BSC), such as smart contract execution and dApp creation.

• Users can also earn interest by staking BNB, and its reinvestment feature provides holders with compound interest.

• In addition, BNB is also trusted by some real-world applications, where people can make digital payments through BNB.

Risks of Binance Coin 

• Despite appearing decentralized, Binance operates in a rather centralized manner, especially when it comes to its regulation of BNB. A small group of validators runs the network and owns the majority of BNB on the DEX, a setup that could increase the vulnerability of the platform.

• One glaring vulnerability is that Binance has encountered regulatory hurdles in countries such as the United States, the United Kingdom, Germany, Japan, Malta, and the Canadian province of Ontario. UK regulators banned Binance in 2021.

Is Binance Coin Worth Investing in?

Binance Coin launched with a supply of 200 million coins. Its current circulating supply is just under 160 million, with a maximum supply of 200 million. Due to Binance’s token burning policy, the current collection of tokens in circulation is less than the initial supply. Binance Coin sold for $0.15 during the ICO and is now the fourth-largest cryptocurrency in the world, with a market cap of over $50 billion.

Since hitting an all-time high of $690.93 on May 10, 2021, BNB’s price has suffered its largest price decline of 51%. Nonetheless, BNB has been steadily recovering, with prices up 64% since trading lows of $196.96 in June 2022.

Although the BNB coin generally enjoys a good reputation in the market, the BNB Chain hack that occurred on October 6, 2022 resulted in the perpetrators making a profit of $110 million. The blockchain had to temporarily shut down the network, suspending deposit and withdrawal functions. Fortunately, the issue was dealt with immediately and well under control, preventing the entire chain from collapsing, and the BNB price was not significantly affected, only falling slightly compared to the broader market. However, the hack raised concerns about network centralization.

Research has found that approximately 12% of BEP-20 tokens are associated with scams. Since these tokens exist within the BNB ecosystem, there is the potential for BNB coins to be affected by spillover effects. This should be taken into consideration when investing.

The BNB price briefly fell below the $330 support level on October 31, 2022. If it can remain above $330 for a long time, it is expected to rebound to the next resistance level, which is $380.

Please note that BNB coin is a high risk, high reward investment, so please conduct detailed research before investing in the market. 

The Future of Binance Coin

Currently, BNB is only used as a token to pay transaction fees. However, the Binance team has bolder plans for the coin. For example, it is now possible to invest in active ICOs hosted on the exchange using BNB, giving Binance Coin holders a way to invest and realize returns.

Binance also announced their plans to create a decentralized exchange called Binance Chain. They claim that the exchange’s new asset will be powered by BNB, further increasing demand for the BNB token and stimulating its price.

As Binance continues to expand and add new features, the BNB coin will become more and more useful. As quarterly coin burns occur, it is obvious to predict that the value of coins will increase significantly. Those who already hold Binance Coin may consider adding BNB to profit later.