In 2017, Changpeng Zhao and Roger Wan built an exchange that would deal purely with crypto. At the time, purely crypto exchanges were rare, and Binance managed to carve out its niche, ranking the exchange as the largest crypto exchange in the world by January 2018.
Today, Binance is still the largest in trading volume, handling an average of $28.85 billion per day at the time of writing this article.
Like many other platforms in the crypto world, Binance has a native coin, BNB, which facilitates the processes on the exchange. In this article, we take an in-depth look at Binance Coin (BNB), its price, its features, and everything else you need to know before you get started on the digital currency.
What is Binance Coin?
As we’ve mentioned above, Binance Coin (BNB) is the exchange’s native token. It was initially created as a utility token to discount trading fees on the platform, and to offer traders an alternative method of paying for the charges on the platform.
At its inception, BNB was issued as an ERC-20 token before moving to the exchange’s own blockchain, Binance Chain, following its launch in May 2018.
BNB was launched in July 2017, through an ICO. All the 200,000,000 BNB tokens (total available supply) were pre-mined before the ICO.
Like many other crypto projects, BNB had to figure out a way to ensure the value of the digital coin keeps increasing over years. Binance had to come up with a strategy that keeps the tokens scarce. Let’s have a look at what it’s all about in the section below.
What is a BNB Burn?
Binance uses a repurchase burn mechanism to help preserve the value of BNB. Every quarter, Binance uses 20% of its profits to repurchase BNB tokens and burn them. Coin burning basically removes coins from circulation, therefore reducing the total supply.
This will continue until 50% of the coins are burned and only 100,000,000 BNB tokens are left in circulation. As the burn events continue, the total supply of BNB tokens in circulation will gradually decrease, increasing the token’s scarcity. Therefore, there will always be demand for the token, which will help increase its value over time.
Binance recently completed its 14th token burn event earlier this year. The event saw 3,619,888 BNB tokens worth $165,791,000 burned, making this the biggest token burn event for the platform, so far. The event reduced the total supply of BNB tokens from 174,152,713 to 170,532,825.
Announcing the highlights of the burn event on the Binance blog, founder Changpeng Zhao mentioned that they had incorporated an accelerated burn program, which they would continue using for the upcoming burn events. Initially, Binance developers had pegged the speed of burn to Binance’s trading volume. However, given BNB’s rapid price increase (43,000% since the 2017 ICO), it would take about 27 years to finish burning the 100,000,000 BNB tokens as promised. The accelerated burn program would achieve the same within 5-8 years.
CZ, as he is commonly known in the crypto world, admitted that the specifics of the program, including how much faster they should speed up the burn process, were still unclear. Several factors such as BNB’s price fluctuations and overall market conditions could change the details of the acceleration program.
BNB ICO
Binance developers distributed the BNB tokens among the different participants as part of the ICO. 50% of the total 200,000,000 BNB tokens were preserved for the ICO. The founding team and angel investors received 40% and 10%, respectively. Therefore, they received 80,000,000 BNB and 20,000,000 BNB.
Binance held its ICO from 1st July to 21st July 2017. All the available 100,000,000 BNB tokens were sold at 15 cents per token and Binance managed to raise $15,000,000 in BTC and ETH.
The ICO was rolled out in three phases on a first come first-served basis. The price of BNB tokens increased at the start of each phase. For example, investors received 2700 BNB tokens for 1 Ether during the first phase but got 2500 BNB during the second phase and 2300 BNB during the third phase. Investors received their tokens five days after the ICO was complete.
Of the $15 million that was raised, 50% was set aside for branding, marketing, and educating new innovators, 35% was used to upgrade the Binance ecosystem and 15% was set aside as a reserve for emergencies and any unprecedented circumstances.
Core Functions of BNB Within the Binance Ecosystem
Initially, BNB was set to function within the Binance ecosystem. Therefore, its core functions revolved around its use in the ecosystem. However, over the three years that it has been in circulation, BNB has evolved and become useful in several other instances. Here’s a look at the core functionalities of Binance Coin.
Paying Transaction Fees on Binance
Binance users can use BNB to pay for any trading fees on the platform and enjoy discount perks. Therefore, BNB tokens can be used to pay for the exchange fees, withdrawal charges, listing fees, among others.
This was the primary function of BNB and it played a crucial role in the adoption of the token in the crypto world. By ensuring that users received discounts for using BNB to pay for their trading fees, BNB developers provided an incentive for crypto enthusiasts to jump on board.
As indicated in its whitepaper, Binance would offer a 50% discount for BNB users during the first year. The discount rate would be reduced to 25% in the second year and will continue being slashed in half until the 5th year, when there will be no discount for using BNB tokens.
For many crypto traders, the discount rates combined with the low trading fees on the platform provide the ideal combination.Therefore, it’s no surprise that more crypto enthusiasts are buying BNB tokens, as indicated by the token’s increase in trading volume over the years.
Participation Rights
Besides paying for transaction charges on the Binance platform, BNB holders can use the tokens for additional services on the exchange. The two primary events that users must have BNB tokens to participate in include the Launchpad events and the community listing voting.
The Binance Launchpad is a platform that the exchange uses to launch new token fundraising events (IEOs), which are held monthly. During these events, new tokens are offered on the platform and users can use their BNB to purchase them.
On the Launchpad, users find all the details they need about specific crypto projects on the platform. Usually, the number of tokens up for sale is displayed, as is the sale price. Binance users then need to enter the lottery ticket system to be eligible for the token sales.
Every project on the Launchpad has a lottery timeline, which includes the BNB calculation period, the subscription period, calculation period, and the final token distribution. Once a new IEO is announced on the platform, the BNB calculation period begins. Binance takes hourly snapshots of users’ BNB balances over a 7-day period. The average balance determines the maximum amount of BNB tokens that a user can commit to the IEO. Users receive one lottery ticket for every 50 BNBs and the maximum number of tickets allowed for each account is 10.
The subscription period follows, where users are required to sign the Token Purchase Agreement before committing their BNB. After doing this, the user’s BNB is locked and they can’t access functions such as withdrawal, transfers, and trading until the final token sale distribution.
The calculation period begins soon after, followed by the final token distribution. The ratio of a user’s committed BNB against the final committed BNB determines the final allocation of the new token. Binance then automatically deducts the corresponding BNB from the locked amount and transfers the new tokens plus remaining BNB tokens to the user’s spot wallet.
Community listing operates in a similar way, only that instead of IEOs, the exchange allows its community to vote for the next project to be listed on the Binance exchange. Two crypto projects are put up against each other and users vote, depending on their average BNB holdings.
The winning project gets listed on the exchange. The winning project then distributes a pre-specified amount of tokens to the participating voters within two weeks after voting closes.
Unlike the Launchpad that allows all BNB token holders, users must apply to participate in the community coin vote, they will need to complete an application form that captures their details.
On-Chain Use Cases
In May 2018, the exchange launched its private blockchain, Binance Chain. Since then BNB has powered the blockchain as its native chain token. In this capacity, BNB functions on the BInance Chain mirror those of ether on the Ethereum blockchain.
The on-chain functions of BNB center around its role on the Binance DEX and its use as gas fees on the Binance chain. Quite similarly to its core function during the Binance launch, BNB tokens are useful for paying transaction fees on the Binance DEX. It is also used to issue new tokens, transfer assets, and send/cancel orders.
BNB also has some additional use cases in the recently launched Binance Smart Chain (BSC). This new smart contract blockchain runs parallel to the Binance Chain and makes it possible for developers to create smart contracts for tokens on the network. Binance Smart Chain is EVM-compatible and, therefore, BNB operates as an ether-equivalent on Ethereum. The token is, therefore, used to pay for gas fees, such as transaction costs and for smart contract execution.
On the BSC, BNB is also used to perform cross-chain transactions, for example if there were some assets to be transferred from the Binance Chain to the Binance Smart Chain. In such instances, relayers can earn BN incentives by validating cross-chain transactions.
BNB is also used for staking on the Binance Smart Chain. A vote delegation process lets users vote for validators and collect staking rewards. Conversely, validators can earn different rewards from the users’ transaction fees by running nodes.
Third-Party Uses
Besides its role in the Binance ecosystem, BNB has multiple uses on third-party platforms and services across the globe. Its expansion beyond the ecosystem has significantly impacted its growth, allowing independent global companies to adopt the token. Here’s a breakdown of some of the ways you can use your BNB tokens on third-party platforms.
- Making payments
BNB holders can use their tokens to pay for goods and services across the network of merchants and establishments that accept crypto payments.
- Booking travel arrangements
Certain websites allow you to make your travel arrangements using BNB tokens. For example, TravelByBit allows people traveling to and in Australia to pay for their goods and services with cryptocurrencies. The service also covers the entire Brisbane Airport. Other examples include Travala.com and Trip.io.
- Entertainment
BNB also comes in handy in the entertainment industry, in various ways. There have been several crypto startup websites that allow their users to pay in various cryptocurrencies. For example, Gifto is a live video streaming platform that allows you to buy your loved ones virtual gifts. Also, MachiX allows users to buy music copyright tokens. A common use of cryptos in entertainment is in the online gaming industry. Sites such as BNB-lotto are allowing users to place their bets using BNB and other digital currencies.
- Finance
Finally, BNB tokens can be used in the finance industry. Several websites loan out to their users and allow them to use BNB as collateral, such as ETHLend and Nexo. Similarly, BNB holders can use their tokens to make investments on global platforms like Moeda.
Binance Coin Price
The value of the BNB token has been increasing steadily over the years. However, the token’s value has grown in leaps during the last few months, which has seen it replace Tether (USDT) on the cryptocurrency scoreboard in terms of market value.
Just recently, the Binance Coin value spiked five-fold, skyrocketing the digital currency’s valuation to $40 billion. The value increase placed BNB as the third-largest digital asset in the world, coming after bitcoin and ether only.
At the time of writing, BNB was trading at $243.97, with a 15.33% increase in the market cap within 24 hours. The coin had registered a 15.4% increase in price change within the same period and a market dominance of 3%
How to Buy Binance Coin Tokens
As we’ll find out in the section below, you cannot ine BNB. If you want to acquire some tokens, you’,ll need to buy them from the Binance Exchange, for which you’ll need an account. Once you have set up everything, you can use three methods to buy BNB tokens.
1.Use bank transfer to buy BNB
Using bank transfer may require a couple of steps. First, you’ll need to find stable coins on the binance exchange that you can buy. You can then transfer the funds from your account to the providers of the stablecoin. Finally, you can use the stablecoins to buy BNB on the Binance exchange.
2.Trade BNB
If you have other cryptocurrencies in your wallet, you can use them to trade BNB. The exchange supports over 150 other cryptos, which you can use to exchange for BNB. You only need to check whether the cryptos you hold are listed on the exchange and open an exchange trade with BNB. Besides, you get some of the best rates when you trade altcoins for BNB on Binance.
3.Use your credit card to pay for BNB
Finally, you can use your credit or debit card to buy BNB tokens from the Binance Exchange. The feature is quite convenient, since you only need a Binance account and you can make the purchase directly from there.
Why can’t you mine BNB tokens?
Cryptocurrencies that can be mined often use the Proof-of-Work consensus mechanism. However, the Binance Chain uses the Byzantine Fault Tolerance (BFT) consensus mechanism. The consensus mechanism is able to resist failures within the system. Therefore, the system can keep operating even if some of the nodes act maliciously.
The system creates several ways of building a BFT system. Therefore, there are multiple ways for the blockchain to achieve consensus mechanism, through the Byzantine Fault Tolerance (BFT).
So, how do you store BNB?
There are different wallets you can use to store your BNB tokens. Ideally, you should go for a wallet that supports the Binance Chain.Some of these wallets include the Ledger Wallet, Trust Wallet, Coinomi, and Atomic Wallet, among others.
Binance Coin News
Over the last few weeks, BNB has been hitting headlines in the crypto world. The 14th burn event that happened earlier this year propelled the coin to new heights. This rapid growth may be attributed to several factors, two of which are highlighted on the exchange’s blog.
For starters, the Binance Launchpad announced its first token sale of the year: SafePal (SFP). The Launchpad used a new subscription format that allowed more users to participate in the token sale. BNB’s value increased from $50 to $140 in one week following this announcement.
Another factor that has led to the rapid growth is the binance Smart Chain. Thanks to the faster transactions and lower fees, the Ethereum-compatible blockchain has increased in popularity. The largest DeFi project on the blockchain, PancakeSwap surpassed Uniswap’s 24-hour trading volume some time last week, elevating BNB to its current third rank.
Binance Coin Forecast: What’s Next?
Following the recent surge in BNB’s value, it’s no surprise that many crypto enthusiasts are keen to see the altcoin’s direction. So, where is BNB headed?
Source: Wallet Investor
The general feeling in the crypto world is that BNB is only headed upwards. Although the rival smart blockchain, Ethereum’s ether, reached a new all-time high of $1950, the increasing gas fees on the network are paving the way for BSC DeFi projects.
Source: Digital Coin Price
BSC is now the go-to choice for many DeFi projects. The increased usage of the platform translates to an increase in the value of BNB. As the platform continues growing and increases the number of projects there, we can only expect BNB to have an upward trajectory. Perhaps the altcoin can even surpass Ethereum in the future, who knows?