Binance Coin (BNB)
Binance is a cryptocurrency exchange which keeps interested people on a consistent learning spree. Just when you thought that having learned something about Binance USD (BUSD) is enough, then here comes Binance Coin. As you will shortly realize, this crypto coin isn’t something so strange or scary. Let’s jump right into the deep learning end,
Binance Coin refers to a crypto coin powering the BNB Chain ecosystem. Initially, BNB ran on the blockchain of Ethereum with the ERC 20 standard. However, later, it turned out to be the native coin of the Binance Chain. Its launching was done in July 2017. Also, just like Bitcoin, it has a maximum amount of BNB tokens which is 200 million. The Binance Coin may be used in trading as well as paying fees on the Binance crypto exchange.
The Way BNB Works
BNB works on the Proof of Stake Authority (PoSA) consensus. It means that the validators are limited to a small number of the largest stakers in the system. The BNB chain method is the way the system manages faster and cheaper transactions as compared to Ethereum. However, it does so by exchanging it for greater centralization. The exchange has higher control of everything.
Initially, the value proposition of the BNB coin was for the crypto exchange users to access discounts, futures trading fees, and margins by paying using the coin. The range of the discount was between 10% to 25%. Although this is true up to now, BNB coins are in demand for staking in the BNB chain as its governance coin. This is to give the holders the opportunity of being part of the decision-making of some projects.
Binance Coin Burning
Binance Coin is very unique as compared to the other cryptocurrencies. Each quarter, it uses 20% of its profits in burning Binance Coins and buying them back. When the coins are burned, they are completely destroyed. According to Binance, it will continue conducting the quarterly burns till it purchases and destroys 100 million Binance Coins which is 50% of the total supply.
The aim of this burning is to make the Binance Coin supply finite. The issue makes them more valuable and scarcer. The other reason for conducting the burning is to destroy the unwanted or unneeded tokens. Also, in a way, it shows commitment to a project. Also, it gives users in proof of burin blockchain the opportunity of creating new blocks.
The Process of Buying BNB
- There are some steps involved in purchasing Binance Coin. I have discussed them below:
- Register with a crypto exchange like Binance or eToro. You will then click sign up or join now then fill out the registration form.
- Uploading address and proof of identity. The aim of this step is to prevent money laundering and fraud.
- Deposit money in your account. The minimum amount to be deposited may vary depending on the country.
- Purchase Binance Coin. To purchase them, you should navigate in the Trade Markets then Crypto, and click Binance Coin.
Why You Should Invest in Binance Coin
As a trader, you should invest in Binance Coin because it is a great utility token. Considering the current crypto world landscape as well as Binance progress, BNB is believed to be a great utility token. Apart from using the Binance exchange in making transactions, you can invest in this coin for you to earn profit. Apart from making an investment, you may use the coin in making online purchases. The purchases may include travel, entertainment, crypto credit card bills, and gift cards.
Binance is a safe investment just like Bitcoin and Ethereum. Therefore, in case you are looking for a coin with high security then you should choose Binance. Apart from that, Binance is the biggest crypto exchange. It makes up about 30% of the volume in the whole crypto industry. Therefore, since it has a crypto exchange platform, that is a good reason to trust its coin.
The Binance smart chain might beat Ethereum. It has a secret weapon. Even though it was launched in September 2020, it highly gained attention in February 2021. It was also during this time that Ethereum had high transaction fees.
Moreover, Binance Coin works as a discount coupon. For instance, it allows Binance users the opportunity of getting a discount when they are paying fees on the exchange. The incentive is good for every investor as it offers a fee reduction. In short, it is a good way of developing a growing community of supporters.
The burndown policy used by BNB also makes it a good investment. In BNB, burning is very important. The reason is that it enhances its stability and growth. Binance vowed that it will utilize 20% of its profit in getting BNB tokens and then burn them in reducing the total supply till 100 million coins are left.
The Limitations of Investing in Binance Coin
The main disadvantage of the Binance Coin is that the exchange owns 80% of the tokens. It means that it is centralized. However, what was the main aim of introducing cryptocurrencies? It was to do away with the issue of centralization. The centralization means that they can pick the party that should be a validator in their blockchain. This is proof that they have too much control over the crypto.
Being a new coin in the market, stability cannot be guaranteed. There is no investor that may predict the way Binance Coin will perform in the future. Also, it is still unknown whether it has the capacity of sustaining the current performance or not.
The fact that it highly depends on the Binance exchange is another issue. It means that its progress has to be linked to the Binance exchange’s reputation. This makes it challenging for crypto to move forward on its own. Therefore, any issue affecting the exchange also directly affects BNB’s reputation. In short, it needs some form of control.
Binance is prone to cyber-attacks. For instance, in March 2018, there was an unsuccessful attempt that resulted in the Binance hacker bounty program. During that period, the company offered $250,000 for any information regarding the hackers. Unfortunately, in May 2019, there was another hack that resulted in the loss of 7,000 BTC.
Lastly, there is heavy competition with the other smart contract cryptos. Although Binance might be stealing from the Ethereum thumber, the introduction of Ethereum 2.0 is a threat to the success of BNB. The reason is that it will use proof of stake and it will process transactions fast. Also, it is believed that the regulatory bodies in China might influence this token in the long run.
Binance Coin Quick Facts
- Binance was created in 2017
- Binance Coin highly benefits from the Binance Crypto Exchange
- The exchange owns about 80% of the Binance Coins making it somehow a centralized type of cryptocurrency.
- BNB has low transaction fees and it is fast
- Binance Coin burning occurs every quarter
