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What is BNB? Simply put, Binance, one of the biggest cryptocurrency exchanges globally, created Binance Coin (BNB), a digital currency. Initially intended to provide discounts to users on their trading fees, BNB now permeates various aspects of the Binance ecosystem. This guide introduces you to the essentials of BNB and its impactful presence in the world of cryptocurrency.
Key Takeaways
- BNB, initially offered at $0.15 during its ICO, has become an integral part of the Binance ecosystem, transitioning from ERC-20 to a native BEP-2 token with the launch of Binance Chain in 2019, and is now heavily utilized for various blockchain applications and decentralized finance.
- The BNB Chain is made up of the BNB Beacon Chain and the BNB Smart Chain. The BNB Smart Chain uses a Proof of Staked Authority consensus mechanism and makes smart contracts work by being compatible with the Ethereum Virtual Machine. This makes BNB more useful for DeFi applications and cross-chain transfers.
- BNB's tokenomics include an auto-burn mechanism that aims to reduce its total supply to 100 million tokens in order to create scarcity. In addition, the market demand for BNB, its utility within the Binance ecosystem, and the company's strategic initiatives all affect its value.
Understanding Binance Coin (BNB)
Binance Coin (BNB) is the brainchild of Changpeng Zhao, the founder of Binance. He envisioned a digital token that would stimulate the expansion of the Binance exchange. Launched to raise funds for the burgeoning Binance platform, BNB quickly became an integral part of the Binance ecosystem, its success inextricably linked to the expansion and acquisitions of the Binance exchange. As a result, Binance coins have gained significant popularity among cryptocurrency enthusiasts.
Currently, Binance ranks as one of the biggest entities in the crypto sphere, with BNB leading the charge, energizing multiple applications within the exchange. From decentralized apps to decentralized finance, BNB’s versatility has made it a standout token in the cryptocurrency landscape.
The Birth of BNB
BNB was first introduced via an Initial Coin Offering (ICO) in July 2017, rapidly capturing the cryptocurrency market’s interest. BNB tokens were sold for $0.15 each during the ICO, helping Binance raise a staggering $15 million in Bitcoin and Ethereum. This capital injection was critical to fueling the exchange’s growth.
From the outset, BNB served as a utility token on the Binance platform. Its primary use was to offer discounted trading fees to users, encouraging adoption and use within the burgeoning Binance ecosystem. This incentive, as well as the diverse holder base created by the involvement of angel investors and the Binance founding team, put BNB on the path to becoming a significant player in the cryptocurrency industry.
Transition to Binance Chain
The year 2019 was a pivotal moment for BNB as Binance unveiled its proprietary blockchain, Binance Chain (BC), triggering the migration of BNB away from the Ethereum blockchain. This move saw BNB become a BEP-2 token on the new Binance chain.
During this transition, binance exchange users exchanged their BNB ERC-20 tokens for the new native BNB coin through a token swap mechanism. As a BEP-2 token on the Binance Chain, BNB was used to pay for transaction fees, known as the gas fee, within the network ecosystem.
This new utility underlined BNB’s evolving role within the Binance ecosystem, showcasing the importance of Binance branding.
BNB Chain: A Closer Look
The BNB Chain ecosystem comprises a sophisticated network of elements, all executing distinct functions. At its core lies the BNB Beacon Chain, focused on governance, and the BNB Smart Chain, acting as a consensus layer. Other components, like ZkBNB and BNB Greenfield, complement these major players in the BNB Chain ecosystem.
The BNB Chain supports BEP-20 and BEP-2 token standards, powered by the native BNB token, facilitating ecosystem interoperability and dual-chain architecture. Binance Smart Chain, being EVM-compatible, supports smart contracts, enables cross-chain transfers with Binance Chain, and uses BNB for gas and staking, effectively extending BNB’s role to smart contract execution, staking, and more.
Consensus Mechanism
BNB Smart Chain operates on a unique consensus mechanism known as Proof of Staked Authority (PoSA). This hybrid model integrates the features of delegated proof of stake (DPoS) and proof of authority (PoA), aiming to achieve an ideal balance between these two popular consensus mechanisms.
Under PoSA, validators not only stake their financial assets but also their reputation, enhancing the network’s security and discouraging fraudulent activities. Designed to support institutional adoption, PoSA harmonizes decentralized consensus with the need for trusted and reputable nodes. However, such a system requires continuous oversight to mitigate potential risks.
Smart Contracts and dApps
The BNB Smart Chain’s compatibility with the Ethereum Virtual Machine (EVM) enables developers to use familiar Ethereum-based tools for dApp development. This feature ensures multi-chain access, fostering a fertile ecosystem for blockchain innovators.
The BNB Chain offers high-performance solutions that serve as a foundation for a growing ecosystem of decentralized applications (dApps). These tools include:
- High-performance blockchain infrastructure
- Fast and low-cost transactions
- Scalability and interoperability
- Secure and reliable network
- Easy integration with existing systems
These features, along with the cost-effective creation of smart contracts on the BNB Smart Chain, make it an attractive platform for developers to innovate within the DeFi space.
BNB Tokenomics: Supply, Burning, and Value
The tokenomics of BNB present a fascinating dimension of the coin. The initial total supply of BNB offered in the ICO was 100 million tokens. However, to manage BNB’s total supply, Binance utilizes an auto-burn mechanism, aiming to reduce the supply to 100,000,000 BNB. This mechanism operates independently of Binance’s quarterly burns and is formula-based, considering the number of blocks produced and the average BNB price during the quarter.
Periodic BNB burns by Binance, designed to decrease BNB’s supply, have typically led to a rise in its market price. For example, a recent burn event on April 14, 2023, eliminated 2,020,132.25 BNB. The state of the cryptocurrency market as a whole affects BNB's market value, with demand and positive sentiment frequently leading to price increases. This effect can be observed when investors burn Binance coins during such events.
Total Supply and Auto-Burn
BNB was initially launched with a maximum supply cap of 200 million tokens. However, as a result of successive burning events, the total supply of BNB as of April 2023 is lower than the original 200 million.
The auto-burn mechanism systematically reduces the BNB total supply to achieve a long-term goal of 100 million BNB. This process is based on a formula that considers BNB’s price and ecosystem growth. Furthermore, Binance’s quarterly burn events are designed to create scarcity by reducing the circulating supply, which could lead to an increase in the coin’s value.
Factors Influencing BNB Value
Several factors influence the value of BNB. Its role in the Binance Smart Chain for paying gas fees, executing smart contracts, and performing cross-chain operations is fundamental for DeFi transactions and services. This utility in the ecosystem enhances BNB’s value.
Another factor that influences BNB’s value is its market capitalization. BNB has surpassed stablecoins like Tether in market capitalization, highlighting its significant market performance. The market sentiment and investor perception of Binance’s performance and future prospects can also significantly influence the price of BNB.
Utility and Use Cases for BNB
BNB boasts a multitude of uses within and outside the Binance ecosystem. From transaction and trading fees to asset issuance costs and token freezing, BNB’s utility in the ecosystem is vast. Holding BNB grants users unique participation rights on the Binance platform, including access to Launchpad events and voting in community listings. Furthermore, BNB facilitates the growth and innovation of DeFi on the Binance Smart Chain through its strategic partnerships.
The adoption of BNB for payments on the Binance platform enhances its value by increasing demand. In addition, Binance’s strategic expansion into new markets has the potential to significantly influence the value of BNB. Its rising price and use as an internal currency on the Binance exchange support its growing reputation as an investment option.
Trading and Transaction Fees
The BNB token is used to cover transaction fees and provides users with discounts on trading fees on the Binance centralized exchange. This utility makes the BNB token a valuable asset for Binance users. It provides a discount on trading fees for users on Binance, which is currently 25% on the spot market and 10% on the futures market.
Users can set up their Binance account to use BNB for fee payments by enabling the ‘Using BNB Deduction’ option under the ‘Dashboard’ section. They must maintain an adequate balance of BNB to ensure uninterrupted access to fee discounts during trading activities.
Beyond the centralized exchange, BNB is used to pay fees on the Binance DEX and is central to the operations of the Binance Chain and Binance Smart Chain.
DeFi and NFTs
BNB plays a significant role in the DeFi and NFT markets. On the Binance Smart Chain, BNB is used for paying gas fees, executing smart contracts, and performing cross-chain operations, which are fundamental for DeFi transactions and services. BNB acts as a catalyst for the growth and innovation in DeFi on Binance Smart Chain, with its strategic partnerships enhancing the ecosystem’s accessibility and connectivity.
In the DeFi ecosystem, BNB enables efficient and cost-effective transactions, promotes user participation in governance, and supports the innovation and funding of DeFi platforms and protocols. On the BNB chain, BNB facilitates the creation, collection, and sale of NFTs, thus playing a significant role in the burgeoning NFT market.
Wider Applications
BNB’s applications extend far beyond the Binance ecosystem. BNB tokens can be used for both online and in-store payments through solutions like Binance Card or Binance Pay, and many e-commerce platforms and online merchants have adopted BNB as a payment option. Using BNB for payments can grant users access to discounts, exclusive promotions, and premium services, enhancing its functionality beyond traditional payment methods.
Apart from being used in the entertainment sector and service industries, BNB serves practical applications in financial platforms. Transactions conducted with BNB are processed swiftly, ensuring quick confirmations and efficient fund transfers, offering a significant advantage over slower and more traditional payment methods.
Acquiring, Storing, and Selling BNB
Various platforms allow the buying, storing, and selling of BNB. It can be bought through the Binance exchange, which offers a straightforward buying process. Apart from direct purchases, users can receive BNB as payment for goods or services. BNB is also available on several other cryptocurrency exchanges, providing alternatives to users not on Binance.
Investors can store BNB in various wallets, including Binance’s own Trust Wallet, hardware wallets for cold storage, and other compatible software wallets. Selling BNB can be done on the Binance exchange or other exchanges that support BNB, with each platform having its own unique selling process.
Buying BNB
BNB can be bought on platforms other than the Binance exchange, such as Bitcoin.com, using various payment methods, including credit cards, bank accounts, and payment apps. To purchase BNB on Bitcoin.com, users must follow a process that involves getting a free wallet, verifying their identity, making the payment, and tracking the order until BNB is received. Beyond purchasing, the Bitcoin.com Wallet app allows for various other functions with BNB, including buying, selling, sending, receiving, and holding the cryptocurrency.
An easier option for buying BNB can be found through brokerages like Caleb & Brown.
Storing BNB
Ledger hardware wallets such as the Ledger Nano S Plus and Ledger Nano X provide secure cold storage options for BNB, using secure element chips to protect private keys. The Ledger Live App works with Ledger hardware wallets, giving users the ability to manage their BNB by checking balances, tracking their transaction history, and securely transacting. For users preferring hot wallets, the Bitcoin.com Wallet mobile app offers a self-custody option for storing BNB after purchase.
MoonPay provides a non-custodial platform that allows BNB holders to store their coins in any supported wallet while offering the ability to cash out directly to their bank account. As a non-custodial service, MoonPay is ISO 27001 certified, ensuring strong security measures to protect BNB holders. Users can also choose to store their BNB using custodial services, which manage the security of their assets.
Selling BNB
Selling BNB is a straightforward process that can be done in the following ways:
- On the Binance exchange or other exchanges that support BNB, trade BNB for any asset available.
- Use Caleb & Brown brokerage to sell BNB for cash deposited directly into a bank account.
- Use services like Bitcoin.com to sell BNB for cash deposited directly into a bank account.
- Use MoonPay to sell BNB for cash deposited directly into a bank account or directly onto a VISA card.
MoonPay facilitates the sale of BNB, starting at a minimum of $30. There are no withdrawal fees when exchanging BNB for fiat currency.
BNB's Future and Investment Potential
The future and investment potential of BNB are promising. Technical analyses project that in 2024, BNB’s price may fluctuate between a minimum of $207.59 and a maximum of $667.70, while by 2027, it could ascend to a maximum of $1,962.80.
The forecast for 2030 shows BNB might trade between $4,981 and $6,046, averaging around $5,124 throughout the year. Long-term projections suggest a significant price increase by 2050, where BNB could potentially reach a minimum price of $187,283 and a maximum of around $245,848.
However, Binance Coin’s valuation is subject to the impact of evolving cryptocurrency regulations by governments worldwide. Due to the high volatility and significant price fluctuations in cryptocurrency markets, experts advise conducting extensive research before investing in Binance Coin (BNB).
Network Development and Expansion
BNB Chain harbors grandiose plans for the future. The ‘One BNB’ paradigm is set to integrate Binance Smart Chain, opBNB (Layer 2), and BNB Greenfield into a unified ecosystem as a strategic direction in 2024. ‘BNB Chain Fusion’ is a planned strategic shift that will phase out the BNB Beacon Chain and introduce new features for governance, staking, and MEV PBS into Binance Smart Chain.
Binance Smart Chain aims to maintain a 140M gas limit, while opBNB Layer 2 seeks to double its gas limit from 100M/second to 200M/second, aiming for a performance of 10,000 transactions per second. The growth of the BNB Chain ecosystem is anticipated, including the launch of sidechains for NFTs that may influence the future value of Binance Coin.
Greenfield, BNB Chain’s data storage solution, targets a significant performance upgrade with the goal of achieving upload speeds of 10 MB/s and download speeds of 100 MB/s.
Evaluating BNB as an Investment
Experts emphasize conducting meticulous independent research before investing in BNB, given the extreme volatility of cryptocurrency markets. Cryptocurrency markets, including those of BNB, experience significant fluctuations, making detailed research and monitoring a crucial part of investment strategies.
Technical analysis offers price predictions for BNB, suggesting potential minimum and maximum prices of $207.59 and $667.70 in 2024, reaching up to $1,962.80 by 2027, and estimates for 2030 and 2050 show even higher potential values, reflecting market optimism and long-term investment considerations.
Summary
In summary, Binance Coin (BNB) is a versatile token with a wide array of uses within the Binance ecosystem and beyond. From transaction and trading fees to DeFi and NFTs, BNB’s utility is vast and continues to grow with the Binance platform’s expansion. BNB’s future looks promising, with ambitious plans for network development and significant potential as an investment. However, due to the high volatility of cryptocurrency markets, extensive research and careful consideration are advised before investing in BNB.
Frequently Asked Questions
Is BNB also Bitcoin?
No, BNB (Binance Coin) is a separate cryptocurrency that can be exchanged for Bitcoin and other cryptocurrencies. BNB was created in July 2017 and initially operated on the Ethereum blockchain before becoming the native currency of Binance's own blockchain.
How much is $1 BNB in USD?
As of now, the value of $1 BNB in USD can be calculated using the latest price calculator.
What is the full meaning of BNB?
The full meaning of BNB is "bed-and-breakfast," which refers to a hotel or hostel that offers a room for the night and a morning meal at an inclusive price.
How can I buy BNB?
You can buy BNB on platforms such as Binance Exchange, Bitcoin.com, or through brokerages like Caleb & Brown. These are reliable options for purchasing BNB.
What are the uses of BNB?
BNB has a wide array of uses in the Binance ecosystem and beyond, including transaction and trading fees, DeFi, NFTs, payments, entertainment, service industries, and financial platforms. These diverse applications make it a versatile asset.
