Binance Coin (BNB) is the native cryptocurrency of the Binance Blockchain BNB chain. But what is the use of BNB? What role does it play in the Binance ecosystem? This article provides a guide to the BNB chain for beginners, exploring its functions, uses, and more.
Key takeaways
BNB is a cryptocurrency that can be used for trading and paying fees on the Binance centralized exchange.
The cryptocurrency allows users to enjoy reduced transaction fees when trading on Binance.
While the asset’s connection to the largest cryptocurrency exchange by market capitalization ensures its enduring functionality and utility, this inherent connection also carries risks — if Binance goes into trouble, BNB will likely go into trouble as well.
In this guide:
What is BNB?
In 2017, Binance introduced the BNB cryptocurrency to the market. BNB is the key utility coin in the Binance ecosystem. Its primary use is to pay exchange trading fees and participate in cryptocurrency sales and various other exchange functions.
BNB is one of the top five cryptocurrencies by market capitalization, below Tether but above XRP. The acronym "Build N' Build" symbolizes the network's growing commitment to collaboration, engagement and open source development.
History of BNB
Binance Coin (BNB) was launched in July 2017 as part of Binance’s mission to revolutionize digital asset trading. The token initially raised $15 million through an initial coin offering (ICO).
“ICOs are a valuable tool if used correctly. We didn’t plan everything. This was our first and only ICO. We learned and adjusted our strategy along the way. We were able to execute quickly after each adjustment. We were lucky in a lot of places. We also stepped on a few landmines, but luckily nothing major.”
Changpeng Zhao: LinkedIn
During the ICO, a total of 100 million tokens were sold at an initial price of $0.11 each, accounting for 50% of the total supply.
How does BNB work?
Initially, Binance launched BNB as an ERC-20 token on the Ethereum blockchain. However, it was later migrated to the main BNB chain, which consists of two interconnected blockchains:
BNB Beacon Chain: This part of the network manages governance activities, including staking and voting on proposed network modifications. Previously, this was called Binance Chain. It is an Ethereum Virtual Machine-compatible consensus layer with a multi-chain hub.
BNB Smart Chain: Handling the creation and execution of smart contracts, BNB Smart Chain was formerly known as Binance Smart Chain.
Over time, BNB’s role has expanded beyond just paying fees. Binance launched Binance Launchpad in 2018, allowing users to participate in new token sales using BNB, driving demand and value.
BNB holders can:
In 2019, Binance launched its own blockchain, Binance Chain, migrating BNB from Ethereum to Binance. This change provides more control and brings the introduction of features such as Binance DEX.
Additionally, in September 2020, Binance further expanded its Smart Chain. The Ethereum-compatible chain supports DApps and smart contracts and enhances the utility of BNB.
How does BNB work?
The BNB chain combines elements of PoS and PoA to maintain the network. Users must stake at least 10,000 BNB to be selected as a validator. This setup is intended to prevent bad actors from becoming validators by sacrificing some decentralization in the validation process.
What is unique about BNB?
The BNB cryptocurrency has several unique features that set it apart from other cryptocurrencies:
Reduced Transaction Fees: BNB allows users to significantly reduce transaction fees when trading on the Binance exchange, thus bringing cost benefits to traders.
Token Sale: Binance Launchpad has hosted several successful token sales where users can participate using BNB.
Staking rewards: Even if users do not hold a large amount of cryptocurrency, they can stake BNB to receive rewards. Delegating BNB to validators generates staking rewards.
Utility beyond Binance: BNB is not limited to Binance, but also plays a role in various DeFi projects, NFT ecosystems, and other blockchain platforms.
Regular Token Burning: Binance is committed to reducing the supply of BNB through token burning, demonstrating its unique approach to managing the cryptocurrency’s scarcity and value.
Token Economics of BNB
Binance has pre-mined 200 million BNB. During the distribution process, the founder received 80 million BNB, which vested in four years. As mentioned earlier, 100 million BNB was allocated for the public ICO sale, while 20 million BNB was allocated to investors without vesting restrictions.
By gradually releasing the cryptocurrency, BNB’s tokenomics promote responsible stewardship and ensure that teams do not have immediate access to all tokens.
BNB destroyed
BNB’s deflationary journey began with the “auto-destruction” plan in late 2017. The program has quietly destroyed over 38 million tokens through quarterly burns.
Binance intends to continue burning tokens until 100 million BNB cryptocurrencies (50% of the total BNB supply) are destroyed. This ongoing process ensures that the token remains deflationary.
How to use BNB
Binance Coin has several functions:
Trading: BNB is the base currency for trading pairs on the Binance exchange. This means that users can use BNB to trade various cryptocurrencies on the platform.
Transaction Fees: BNB can be used to pay transaction fees on the Binance exchange, providing users with lower fees compared to other payment methods.
Staking: BNB can be staked to receive rewards such as additional BNB or other tokens. This staking process helps secure the network and rewards users for their participation.
Utility Coin: Binance Coin primarily serves as a utility cryptocurrency within the Binance platform. It offers various benefits, including reduced transaction fees and access to special features and services.
DeFi and NFTs: BNB has utility outside of Binance and has been integrated into various DeFi projects and non-fungible token (NFT) ecosystems. This expands its use within the wider cryptocurrency space.
BNB wallet
Anyone who wants to buy BNB must have a safe and secure BNB wallet to store their tokens and facilitate interaction with DApps on Binance Smart Chain. Think of your wallet as a gateway to your assets.
Users can store BNB in software or hardware wallets. Trust Wallet is an excellent hot wallet option because it is an official Binance wallet and therefore provides the most seamless experience for BNB (Binance Cryptocurrency). Additionally, Trezor, Ledger, and Safepal are leading hardware options. When choosing a wallet, prioritize usability, support for other assets (depending on your portfolio or trading or HODLing plans), and security of your crypto wallet.
BNB: Application speed is very fast
The BNB cryptocurrency’s versatility and role in the Binance ecosystem make it a unique crypto asset. However, BNB is not without its challenges. Binance’s approach to creating a faster, more cost-effective blockchain comes at the expense of decentralization. Nonetheless, BNB’s continued growth and adoption shows that BNB has a bright future as an integral part of a mature decentralized ecosystem.
Frequently Asked Questions What is Binance Coin used for?
Binance Coin (BNB) is used for a variety of activities within the Binance ecosystem, including trading, token sales via Binance Launchpad, and staking. BNB holders also enjoy reduced trading fees and access to special features on Binance CEX.
Is BNB a good currency?
BNB has the utility of trading and fee reductions, as well as investment potential. Ultimately, whether BNB is a "good currency" for you will depend on your investment goals and personal preferences and requirements. For example, holding BNB is beneficial if you interact with the Binance ecosystem on a regular basis.
Is BNB real or fake?
Binance Coin (BNB) is a legitimate cryptocurrency with a solid position in the crypto market. Over the years, Binance Coin’s active trading, strong blockchain ecosystem, and role within the Binance ecosystem have solidified its authenticity and reputation.
Are BNB and BTC the same?
no. Binance Coin (BNB) and Bitcoin (BTC) are different cryptocurrencies with different uses and technologies. While Bitcoin is primarily used as a decentralized digital currency and store of value, Binance Coin operates within the Binance ecosystem, facilitating transactions, lowering transaction fees, and providing a variety of useful features.
Should I invest in Bitcoin or BNB?
Choosing Bitcoin and Binance Ccin to invest in depends on your goals and risk tolerance. It's always a good idea to diversify your portfolio and seek professional advice to ensure your investments are aligned with your financial goals.
How do I buy BNB?
You can buy Binance Coin (BNB) through a variety of exchanges, including Binance. This is done by creating an account, verifying identity, depositing funds and placing an order. It's a simple process, and once you earn BNB, you can explore its various use cases in the crypto ecosystem.
Can I stake BNB to receive rewards?
Yes, you can stake Binance Coin by locking Binance Coin (BNB) to earn rewards and often receive more BNB or other cryptocurrencies. Binance offers this option, which is a great way to grow your cryptocurrency holdings while actively participating in the blockchain ecosystem. Be sure to research specific staking terms and conditions as they may vary by platform.
Disclaimer:
The content and pictures published in this article are intended to disseminate industry information. The copyright belongs to the original author and is for non-commercial use. If there is any infringement, please contact us. All information is for reference and sharing only and does not constitute any investment advice. The cryptocurrency market carries a high degree of risk, and investors should make decisions based on their own judgment and careful evaluation. Investment is risky, so be cautious when entering the market.
