What Is a Binance Coin (BNB) and What Is It For?


When you enter the world of cryptocurrencies, you inevitably come across Binance, the world’s largest cryptocurrency exchange. Reporting 28.6 million active users as of the end of 2021, Binance is in its own category for market share, handling over 15% of global cryptocurrency traffic. That is, if we exclude the third-place crypto exchange, Mandala, with which it shares its liquidity.

To serve all those millions of users, Binance launched Binance Coin (BNB) in the same year it was founded, 2017. There are many uses for Binance Coin, but first let’s start with how and why it was created.


Why did Binance launch Binance Coin (BNB)?


binance-exchange
Image credit: statist

Just as private companies go public with an IPO (Initial Public Offering) to attract investors, crypto companies go public with an ICO (Initial Coin Offering) to do the same. With traditional IPO launches, investors gain a stake in a company through shares. in turn, ICOs launch tokens on blockchain networks.

In the case of Binance, the company headed by Changpeng Zhao launched Binance Coin with a BNB ticker on the Ethereum blockchain. Ethereum is still the largest smart contract platform with 55% of the market share, so it was a good decision to choose Ethereum to launch BNB as an ERC-20 token, an Ethereum smart contract standard.


market share
Image credit: Defiflame

Three years after the launch of Binance Coin, Zhao launched the Binance Smart Chain (BSC). This is Binance’s version of Ethereum. However, BSC still has a market share 9 times lower than Ethereum, in less than 6% compared to 55% for Ethereum.

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With the launch of the BNB ICO, Binance distributed 10% (20 million BNB) of the tokens, at $0.15 each, to so-called angel investors. These are private, wealthy individuals who provide companies with enough start-up capital to fully develop their business roadmap. Binance held 40% (80 million BNB) of tokens for itself, leaving 50% of the remaining BNB supply to the public.


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Image credit: TradingView

The maximum supply of Binance Coin was set at 165,116,760 BNB. As Binance grew, the BNB coin appreciated, as did the company’s shares on the stock market. In other words, imagine getting BNB in ​​2017. It would have appreciated by 368.137 percent! So, if you had been a Binance investor with just $1,000 worth of BNB, you could now turn that huge value into $2.5 million.


Now that you understand the difference between BSC and BNB, and their service as a funding vehicle, it’s time to see what you can actually do with Binance Coin as a utility token.

Explanation of the uses of Binance Coin

First of all, Binance Coin (BNB) represents your stake in Binance. If you think the company is poised to grow further, this will be reflected in the BNB price, allowing you to sell it later at a much higher price than when you bought it.

Outside of that, BNB is just like all other cryptocurrencies on other blockchains. You can trade BNB for any other token available on the Binance exchange. Also, the company incentivizes you to hold BNB because it gives you a discount when you pay your transfer/exchange fees in BNB instead of other currencies.



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Image credit: Binance white paper

Further expanding with other exchanges, Binance made a deal with Crypto.com. This exchange made a deal with credit card companies to issue credit cards backed by crypto assets. In turn, Binance saw this as an opportunity for Crypto.com to list BNB as a form of payment for credit card bills. In this way, Crypto.com made inroads towards Binance’s larger user base, while Binance gained greater general acceptance of its native cryptocurrency.

Likewise, online merchants can choose to choose BNB to pay for their services. This ranges from booking hotels and flights to paying for lottery tickets and gifts. This list has all online platforms where BNB can be used.

Lastly, Binance has its own version of PayPal, called Binance Pay. With BNB in ​​their Binance wallet, users can use it directly to buy on these merchantswithout having to do any fiat-crypto conversion.

BNB Burn Mechanic

On a final note, Binance has a mechanism that ensures that BNB will appreciate in value making them scarce. does this for quarterly burnsas explained in Official Binance White Paper. Burning tokens just means taking them out of circulation, so that they form a more scarce pool.

“Each quarter, we will use 20% of our profits to buy back BNB and destroy them, until we buy 50% of all BNB (100MM) again. All buyback transactions will be announced on the blockchain. We will eventually destroy 100MM BNB, leaving 100MM BNB remaining.”

After all, Bitcoin became so valuable due to its finite limit of just 21 million BTC. In the same way, when the Federal Reserve increased the USD money supply by trillions, it massively devalued the dollar, causing the highest inflation in 40 years. It just goes to show that, more often than not, trusting companies with your money is a better bet than governments.



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