Binance Coin (BNB) is the native cryptocurrency of the Binance exchange platform. Designed to facilitate transactions within the Binance ecosystem, BNB provides users with a multitude of benefits including discounted trading fees, participation in token sales, and more. Over time, the use cases for BNB have expanded well beyond the Binance exchange.
How Does Binance Coin Work?
Binance Coin operates on the Binance Smart Chain (BSC), which is an innovative blockchain network developed by Binance, a finance software . BSC supports smart contracts and is compatible with the Ethereum Virtual Machine (EVM), facilitating the creation of decentralized applications (dApps). The BNB token is used to pay for transactions on the BSC and can also be staked in various DeFi protocols on the chain.
Unlike Bitcoin or Ethereum, BNB isn’t mined. Instead, BNB tokens were initially issued during an Initial Coin Offering (ICO) held by Binance in 2017. Out of a total supply of 200 million, half was allocated for the ICO, and the remaining 100 million was split between the founding team and angel investors.
What is BNB Burning?
A unique aspect of BNB is the coin burning mechanism. Coin burning is a process where a certain amount of cryptocurrency is permanently removed from circulation, reducing the total supply. This is typically done by sending a portion of the tokens to a “burn” address from which they can’t be retrieved.
Binance schedules quarterly BNB burns based on the trading volume on its exchange. This is done with the intention of stabilizing the price and creating scarcity, which could lead to an increase in value over time. As of the latest burn, Binance has destroyed over 15% of the initial supply.
History of BNB Coin
Binance Coin was launched in July 2017 through an ICO, a month before the Binance exchange went live. The ICO raised approximately $15 million, and these resources were used to fund the development and launch of the exchange.
Initially, BNB was an ERC20 token on the Ethereum network. However, in April 2019, Binance launched its own blockchain network, the Binance Chain (or BNB Chain), and migrated all ERC20 BNB tokens to its native BEP2 BNB tokens.
The launch of Binance Smart Chain in September 2020 further expanded the utility of BNB, enabling the development of decentralized applications and DeFi protocols, and making BNB an integral part of the Binance ecosystem.
BNB Initial Coin Offering (ICO)
Unlike Bitcoin or Ethereum, BNB isn’t mined. Instead, BNB tokens were initially issued during an Initial Coin Offering (ICO) held by Binance in 2017. Out of a total supply of 200 million, half was allocated for the ICO, and the remaining 100 million was split between the founding team and angel investors. The ICO raised approximately $15 million, which was used to fund the development and launch of the Binance exchange. This capital was a vital resource for Binance during its early days, enabling it to grow rapidly and become a dominant player in the cryptocurrency exchange space.
What is Binance Coin Used For?
Binance Coin has numerous use cases both inside and outside the Binance platform:
- Trading Fee Discounts: Binance users can use BNB to pay for trading fees on the exchange and enjoy a discount.
- Participation in Token Sales: Binance’s Launchpad platform, where new cryptocurrency projects are launched, requires users to purchase tokens using BNB.
- Payment for Goods and Services: BNB can be used to pay for travel expenses, gifts, and more through various partnerships that Binance has established.
- Staking and Farming: BNB can be staked on Binance Chain to earn rewards or used in various DeFi protocols on Binance Smart Chain.
- Gas Fees: BNB is used to pay for transaction fees on the Binance Smart Chain.
- Overnight Fee: Some platforms may charge an overnight fee for holding a leveraged position in BNB, similar to traditional financial instruments.
Benefits of BNB Coin
Binance Coin offers several advantages:
- Versatility: BNB is not just a utility token for the Binance exchange. Its use cases have expanded to many sectors, from DeFi to e-commerce.
- Cost-Efficient: BNB users benefit from discounted trading fees on Binance, potentially resulting in significant savings for high-volume traders.
- Accessibility: BNB can be easily purchased on the Binance exchange and other platforms supporting BNB.
- BNB Price Forecast: Predicting the price of BNB is complex due to the numerous factors that can influence it, including demand within the Binance ecosystem, the impact of coin burns, and broader market conditions.
Disadvantages of BNB Coin
Despite its benefits, BNB also has some disadvantages:
- Centralization: Binance controls a significant portion of the BNB supply, which raises concerns about centralization and influence over the coin’s value.
- Regulatory Risks: Binance has faced regulatory scrutiny in several countries, which could potentially impact BNB. Complex tax and regulatory issues are not a rarity with Binance, so any changes in these regulations could affect the value and usage of BNB.
BNB Governance
Governance in Binance Smart Chain is largely maintained by Binance itself. The BNB token plays a role in the management of the network, including the Binance Decentralized Exchange (DEX). Here, BNB is used for voting on various proposals, including network upgrades and fee structures, illustrating the token’s central role in the chain’s governance.
Binance schedules quarterly BNB burns based on the trading volume on its exchange. This is done with the intention of stabilizing the BNB price and creating scarcity, which could lead to an increase in value over time. As of the latest burn, Binance has destroyed over 15% of the initial supply.
Is Binance Banned in the U.S.?
While Binance itself is not banned in the U.S., the global version of the exchange, Binance.com, does not accept U.S. customers due to regulatory considerations. Instead, Binance has established a separate platform, Binance.US, specifically designed to comply with U.S. regulations.
Binance and U.S. Regulation
The relationship between Binance and U.S. regulation has been complicated. Binance, like many cryptocurrency platforms, operates in a rapidly evolving regulatory landscape. Several regulatory bodies around the world, including the U.S., have been scrutinizing Binance’s operations. This scrutiny is generally tied to concerns around compliance with existing securities laws, know-your-customer (KYC) procedures, and anti-money laundering (AML) policies.
Binance has responded to these regulatory pressures in several ways, including increasing their compliance procedures and spinning off certain operations into separate entities, like Binance.US, which operates independently and in compliance with U.S. laws and regulations. Nonetheless, the potential for future regulatory changes presents a level of uncertainty for Binance and its users. Binance BNB, like all cryptocurrencies, comes with certain risks and should be used responsibly. The BNB token is intrinsically tied to the success of the Binance platform, and as such, its value can be influenced by factors such as regulatory actions, the success of the exchange, and general market conditions. Additionally, while the Binance platform has implemented robust security measures, it is not immune to potential hacks and cyber-attacks. Always ensure that you understand the risks involved and use secure methods to store your tokens.
