What is Binance Coin (BNB)?
What is Binance Coin (BNB)?
Binance is a cryptocurrency created by the Binance exchange that powers the Binance chain ecosystem. It was initially issued as a utility token for discounted trading fees but it has grown since then to have several use cases such as paying for transaction fees on the Binance network, trading, online services, financial services, and entertainment.
The cryptocurrency was initially based on the Ethereum blockchain but has since migrated to Binance’s blockchain, the Binance Chain.
Who is the Founder?
The Binance Coin was founded by the world’s largest cryptocurrency exchange by trading volume, Binance. Binance, the crypto exchange was founded by Changpeng Zhao who is also known as “CZ”. Changpeng Zhao, is a Chinese Canadian businessman. He was born in Jiangsu, China, and migrated to Canada with his family at a young age. Changpeng is based in Singapore at the moment.
Changpeng has an impressive track record of launching successful startups. After launching Binance in July 2017, the network grew to be the largest crypto exchange in the world within 180 days.
Then there’s Yi He, who is a co-founder and the current CMO of Binance. Yi He heads the Binance branding, marketing, and business strategy. Yi was responsible for the Binance Branding business strategy that skyrocketed the platform into the limelight as she pivoted the exchange from a Chinese-based trading platform to a global blockchain network.
Before she co-founded Binance, Yi was the vice president of Yixoa Technology, a leading mobile video tech brand that developed apps like Yizhibio and Xiaokaxiu. She was also the co-founder of the crypto exchange OKCoin.
How does Binance Coin (BNB) Work?
Key Features of Binance Coin (BNB)
Burning is the process of taking tokens out of circulation and sending them to a wallet where the tokens cannot be accessed. Burned tokens are often sent to Burn addresses. A Burn address which is also known as an eater address is a digital wallet that cannot be accessed because it does not have a private key attached to it. A Burn address is like a lock without a keyhole. Burning of tokens often increases the price of the token. This is because the lesser the supply of a crypto asset in demand, the higher the price of the token.
Burned BNB tokens are removed from the overall supply and not accessible by anyone forever. This means that the burned BNB tokens can never be traded.
To increase transparency and predictability to the BNB community, the amount of BNB tokens to be burned is adjusted by the BNB Auto-Burn mechanism. This adjustment is based on the number of blockchains generated on the BNB Smart Chain and BNB’s price.
Binance exchange burn Binance Coins quarterly. The quarterly Burns will be performed until 50% of the total supply (100 million BNB tokens) is destroyed. This is to ensure that there is a finite supply of BNB tokens, which will make the coin scarce and more valuable. A fixed ratio of the gas fee collected is burned with each block. BSC validators determine the ratio of the gas fee burned.
BNB Pioneer Burn Program
Binance launched the BNB Pioneer Burn in 2020. The program enables Binance exchange to cover the losses of BNB holders who lost their BNB tokens as a result of a mistake they made when trying the Binance Smart Chain. The Binance crypto exchange counts these lost tokens under its quarterly BNB token burn activities. The creation of this program has resulted in the adjustments of the quarterly BNB token burn.
Here is how the program works. Once a user submits their case through Binance’s customer support channels, Binance will investigate to confirm if the case is eligible for the program. Once it has been established that the case is eligible, the Binance exchange will reserve the tokens. Once the BNB tokens are reserved, Binance does the following. The procedure for BNB tokens is different from that of pegged tokens.
For BNB, Binance does the following;
- BNB is sent to the originating address of the case. The trading fees are deducted from the BNB being sent.
- The number of BNB sent is then booked and counted as part of the total BNB tokens burned in the next quarterly burn.
Binance does the following for pegged tokens through its Token Canal project:
- Binance mints extra tokens that correspond with the number of tokens lost.
- The newly minted tokens are sent back to the originating address of the case.
Binance exchange deducts the transaction fee for sending the tokens to the owner but the extra amount is not calculated as a part of the increased total supply.
For a case to be eligible for the program, it must meet the following requirements:
- The loss must be from an honest mistake.
- The lost tokens were transferred to a BEP-20 contract address. The contract address must be verified on bscsan.com. This is to ensure that the loss can be publicly justified. It is also to ensure that it is recognized as moving assets out of circulation and to prove that the assets cannot be brought back into circulation forever.
- The lost tokens must be a pegged token like BTCB or a BNB “wrapped” token like WBNB.
- The lost tokens must be worth more than $1,000 but less than the expected amount of BNB to be burned in the next quarter.
As stated earlier, the introduction of the Burn Program led to the adjustment of the BNB quarterly token burn. The adjustment did not result in a change of the original amount of tokens to be burned per quarter. It was only adjusted to accommodate token burns that were caused by losses made by users who were reimbursed under the BNB Pioneer Burn Program.
Weaknesses of Binance Coin (BNB)
- Japan: Japan has warned Binance for operating without permission.
- Germany: Germany’s financial regulators accused the Binance stock token of violating European Union Securities Laws.
- UK: Binance affiliate in the United Kingdom has been accused by the Financial Conduct Authority of operating in the UK without approval.
- South Korea: Binance shut down Korean- currency trading pair and Korean language support after South Korean regulators asked all crypto exchanges in the country to get registered.
- China: China’s crypto trading rules in recent times have not favored the exchange.
- Thailand: In July 2021, Thailand’s financial agency filed a criminal complaint against Binance for operating a digital asset without a license.
- Malaysia: Binance shut down access in the country after it faced enforcement action from the country’s financial regulators.
- The Cayman Islands: The Cayman Islands Monetary Authority has accused all the entities associated with Binance of being unregistered, unlicensed, and unregulated. This means that Binance is not authorized to operate within or from the Cayman Islands.
How is Binance Coin (BNB) Created?
The entire BNB coin supply of 200 million coins was issued during its Initial Coin Offering (ICO). However, this supply is destroyed systematically by the burning process.
Also, the BNB Chain on which the Binance Coin exists is powered by a Proof of Stake mechanism where blocks are minted by validators. And in exchange validators receive new Binance Coin tokens as rewards.
Mining Binance Coin (BNB)?
Binance Coin cannot be mined as it is a Proof of Stake coin. Rather, you can earn rewards as you would when mining by becoming a delegator or validator on the BNB Chain. A delegator is a sub-node on a network that can delegate its BNB stake to an approved validator. A validator is a node operator that takes part in transaction verification and the consensus process. The first typically involves you simply joining a validator pool while the latter involves you holding a sizable amount of BNB. You can become a delegator by using services like Coinbase, Trust Wallet, Kraken, and a host of others.
Which Blockchain does Binance Coin (BNB) Use?
The Binance Coin is on the BNB Chain. It is the native currency of the BNB Chain ecosystem and is the primary exchange token of the Binance cryptocurrency exchange. At its launch, the BNB coin was on the Ethereum blockchain and was originally released as an ERC-20 token. However, the Binance team decided to upgrade and migrate the token to the Binance Smart Chain, which is currently called the BNB Chain.
How to Use Binance Coin (BNB)?
Binance Coin is the cryptocurrency that powers the BNB Chain ecosystem. It is the native coin of BNB Smart Chain and BNB Beacon Chain and has a lot of uses in the Binance ecosystem.
BNB is used to pay trading fees and transaction fees on the Binance decentralized exchange, PancakeSwap and in BNB Beacon Chain and BNB Smart Chain. Binance Coin is also used to provide liquidity in Binance Liquid Swap and to reduce transaction fees on the Binance exchange.
BNB holders can take part in the token sales hosted on the Binance Launchpad. They can also donate to Binance Charity. Binance Coin holders can also use the coin to make credit card payments, process payments, and buy virtual gifts. They can also pay for hotels and flights on supported websites.
How to Buy Binance Coin (BNB)?
BNB can be purchased on Binance.com and other crypto exchanges like eToro, Coinbase, and Crypto.com. For a comprehensive list of exchanges that support the trading of BNB, check CoinMarketCap.
The process of buying BNB on these exchanges may differ, but regardless of which one you choose, you will have to create an account with the exchange to be able to trade BNB.
You can either buy BNB on these exchanges with fiat currency or with another cryptocurrency. The latter is usually more stressful, so it is best you use fiat currency.
How to Store Binance Coin (BNB)?
BNB can be stored in the Binance Chain wallet. This is Binance’s official browser extension wallet.
You can also store your Binance Coin in wallets like Metamask, Trust Wallet, Coinomi, Coinbase, and TRON. Hardware wallets like Trezor Model T, Ledger Nano X, and SafePal S1 Hardware Wallet also support the storage of BNB.
Best Place to Stake Binance Coin (BNB)?
The best place to stake the Binance Coin is on the Binance platform itself. To do so, visit https://www.binance.com/en/earn and you’ll see the options for staking your BNB coins. If you’re using a mobile device just head to the funding wallet and hit subscribe to earn and view all options available.
What You Need to Know about the Future of Binance Coin (BNB)
The Binance Coin has historically fluctuated like other similar cryptocurrencies over the years. And its market cap has also risen over the years. Since the coin’s ICO, BNB has increased in value significantly reaching up to $600 per coin in particular instances. So if the past is anything to go by, BNB has a solid future ahead.
Conclusion: Should You Put Your Money in Binance Coin (BNB)?
Its previous price rises generated profit for investors that entered and sold at the right time. But for the future, BNB’s price value will be determined by the continued acceptance of the Binance ecosystem. That said, there’s no surefire way to predict that the coin’s value will keep rising.
Risks in Investing in Binance Coin (BNB)
Investing in the Binance Coin holds potential risks like volatility and uncertainty. Like every other cryptocurrency, BNB is a volatile asset meaning that its price value fluctuates in very short intervals. And at times these fluctuations are extreme, which can cause you to lose your entire investment when you sell. So only invest what you’re willing to lose in the worst-case scenario.
Most frequent questions and answers
No, there are 3 versions of the BNB coin. The first is the ERC-20 BNB token. This was used during the ICO. Second, there’s the BEP-2 BNB token, and thirdly, the BEP-20 BNB token. These are all the same token and they serve the same purpose. However, it is crucial to know the differences as making a transfer using the wrong network can result in the loss of your tokens between transfers. It’s also important to clarify this, the BNB BEP-2 is on the BNB Beacon Chain, the BNB ERC-20 is in the Ethereum network, and the BNB BEP-20 is on the BNB Smart Chain.
BUSD is a stablecoin pegged to the value of the US dollar, while BNB is a regular volatile cryptocurrency. So if you intend to have a better store of value then you should use BUSD but if you want to hold a cryptocurrency that has the potential of increasing in value with time or decreasing depending on the trend of the market you should use BNB.
BNB has a current circulating supply of 161,337,261 BNB coins and a maximum supply of 200,000,000 BNB coins.
BUSD or Binance USD is a new regulated USD-denominated stablecoin that was approved by the New York State Department of Financial Services and it will be launched in partnership with Binance and Paxos. For every unit of BUSD, there’s 1 US dollar kept in reserve. So the supply of BUSD is pegged to the United States dollar at a 1:1 ratio. The token’s issuer is Paxos, and they release monthly attestations to the stablecoin’s reserves.
One of the major reasons Binance is very popular is that it offers one of the lowest trading fees in the world. Users only need to pay 0.1% to execute trades. It also offers many rare or newly launched altcoins and other interesting financial instruments, products and services.
The BNB Chain is the group term that groups 2 separate chains; the Binance Beacon Chain and the Binance Smart Chain. BNB is an acronym for Build and Build.
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