Cryptocurrency Explained: Binance Coin
Main Points
Binance Coin (BNB) is a cryptocurrency issued by the popular crypto exchange, Binance.
Binance Coin was created as a utility token for discounted transaction fees on the Binance Exchange.
Since its inception in 2017, Binance Coin has become one of the largest cryptocurrencies on the market by market capitalization.
What is Binance Exchange?
Cryptocurrency exchanges help people swap cryptocurrency and digital assets for other assets. One example is swapping cryptocurrency for fiat currency or money printed by governments like the dollar, euro, or yuan. Another example is swapping crypto for another crypto—for instance, you could swap BTC for LTC or ETH.
Among the most popular crypto exchanges is Binance. Created in 2017 by Chanpeng Zhao (referred to as CZ in the crypto space), Binance is known for its crypto to crypto transacting as it does not support fiat currency. It offers fast transactions by processing 1.4 million orders every second. It ranks as the world's number one exchange by volume, with more than $15 trillion in daily volume.
When using Binance Exchange, you can swap, list, fundraise, or withdraw crypto. Binance also provides public wallets for its users. Additionally, those wishing to launch a coin can use Binance for raising funds through Initial Coin Offerings (ICOs).
Binance established this level of popularity based on its low transaction fees, high liquidity, and the ability for additional discounts when paying transaction fees with its native cryptocurrency Binance Coin (BNB).
Due to regulatory concerns, users in the United States must use a separate branch of the Binance platform, Binance.US. Like its parent company, Binance US also features low transaction fees and a wide selection of cryptocurrencies.
What is Binance Coin (BNB)?
Binance Coin is the native coin of the Binance Chain and is used to fuel the Binance Ecosystem. Binance Coin was initially hosted on the Ethereum blockchain as an ERC-20 token but moved to its own network, the Binance Chain, in 2019.
Binance launched BNB through an Initial Coin Offering in 2017. During the ICO, Binance issued the coins at 1 ETH for 2,700 BNB or 1 BTC for 20,000 BNB. All BNB tokens were sold within 20 days, raising approximately $15 million.
The total supply of BNB is capped at 200 million coins - all released during the ICO. One hundred million of those coins were released to the public, 80 million were allocated to the Binance team, and 20 million were given to angel investors. However, currently, only a little more than 168 million BNB are in supply due to periodic coin burning events.
What is coin burning?
Coin burning is the process of permanently removing coins from circulation, reducing the total supply. Essentially, burning is the opposite of minting. Binance does this periodically to increase the scarcity of the coin, which theoretically pumps up the price. Binance has scheduled BNB burning events every quarter until 50% of all BNB are finally destroyed. Once Binance has completed all coin-burning events, there will be 100 million coins left.
As of April 2021, there have been 15 BNB burns. The most recent burn destroyed nearly 2 million BNB, permanently taking $595,314,380 worth of BNB out of circulation.
Why invest in BNB?
Binance Coin consistently ranks among the top ten cryptocurrencies by market value, making it relatively stable compared to other coins. Binance Coin has had a strong year - since the beginning of the year, the price of BNB has increased tenfold.
Investing in BNB is worth considering If you often use Binance Exchange because you get a 10% discount on transaction fees if you pay with BNB. Additionally, BNB is an accepted form of payment by a growing number of merchants.
Binance Smart Chain
Binance Chain is the home of the BNB token and is designed for fast transactions. However, this design makes the blockchain inflexible compared to other blockchains like Ethereum, which support decentralized applications (DApps). To solve this problem, Binance created Binance Smart Chain, a separate blockchain that you can use to develop DApps similar to Ethereum.
Binance Smart Chain was built with cross-chain compatibility with Binance Chain to ensure the two blockchains run independently and in parallel. If the Binance Chain were to go offline, the Binance Smart Chain would continue to run without any hindrance and vice versa.
Binance Smart Chain has a 3 second block time and uses Proof of Stake Authority (PoSA). PoSA is where participants stake BNB (or put up funds for collateral) to validate transactions. If they propose a valid block to add to the chain, they receive the transaction fees from the block's transactions.
With PoSA, there are no miners, specialized computers, or massive energy consumption - all that is needed to stake is a regular computer and a minimum amount of cryptocurrency to offer as collateral, which is called a stake. PoSA is secure because If you try to cheat - you will lose the currency you staked. Therefore, in PoSA, acting honestly is more profitable than acting dishonestly.
Binance Decentralized Exchange (DEX)
Currently, Binance Smart Chain's most prominent DApp is Binance Decentralized Exchange (DEX). Released in 2019, Binance DEX is an extension of the central Binance.com exchange. It allows users to transact cryptocurrencies while retaining complete control over their funds with limited to no input from a third party.
Final Thoughts
As a cryptocurrency with a stable price and many uses, Binance Coin is an excellent choice for those looking to diversify their cryptocurrency portfolio.
Are you interested in buying BNB? You can quickly and safely purchase BNB by using your nearest CoinFlip ATM or through our CoinFlip Preferred.
