Binance coin is the proprietary cryptocurrency of the Chinese exchange Binance. It was released in 2017 specifically for partial payment of any platform commissions. Despite its youth, the coin quickly rose in value and took third place in the CoinMarketCap capitalization rating. Let’s take a look at what makes it unique and whether it is worth investing in.
What is BNB
You might be surprised to learn that there are now three different coins called BNB. They belong to different blockchains, and the only common things about them are their course, their creator and, of course, their names. Although, according to the Binance team, it is one cryptocurrency. To sort out all this confusion, one should better study the history of the coin.
BNB appeared as an ERC 20 token on the Ethereum blockchain. Binance became the first cryptocurrency exchange to have its own coin. At first, the token was used only within the exchange. It made it possible to partially pay any commissions of the platform: trading, withdrawing funds, paying for adding a new cryptocurrency to the exchange. BNB could be used to buy tokens from various ICOs. Binance provides an opportunity to purchase coins from projects that are still at the ICO stage, which are not available on other cryptocurrency exchanges.
Gradually, Binance coin gained value as an independent digital asset. This was facilitated by the rapid growth of the Binance exchange. And this is where the transformations began, which led to the emergence of three separate Binance networks.
At first, BNB was not a traditional cryptocurrency like Bitcoin or Ethereum. Usually, blockchain is needed for a cryptocurrency to function – a chain of blocks in which the entire transaction history of the cryptocurrency network is recorded. BNB did not have its own blockchain before the BEP2 standard appeared in 2019. After the release of BEP2, the ERC20 network continued to function anyway. BEP2 and ERC20 wallets cannot interoperate as they have different address formats.
In September 2020, a new format for the BNB network appeared – BEP20. The need to create it was caused by the lack of flexibility of the BEP2 blockchain. BEP20 is a blockchain developed on top of the Ethereum blockchain, but incompatible with both ERC20 and BEP2. Although many sources claim the opposite, simple experiments show that any of the cryptocurrency wallets on the market can only carry out transactions between BNB wallets on the same network. Attempts to transfer coins to a wallet on another network invariably end in failure, and in some cases – in the loss of funds.
In fact, the transfer of funds between networks is possible through the Binance exchange, however it cannot be proved that this is done precisely through interaction between blockchains. Possibly through a regular cryptocurrency exchange.
ICO and token burning
Binance is owned by Shanghai-based Beiji Technology, which is run by Changpeng Zhao. The site is famous for its speed (1.5 million transactions per second), low commissions (0.1%) and a wide choice of currency pairs.
Recently, ICO has gained great popularity. Initial coin offering is a form of investment attraction that allows you to raise funds for the development of a startup. Unlike IPO, which is designed for large investors, ICO gives anyone an opportunity to participate by buying tokens for fiat money or cryptocurrency.
The Binance exchange held an ICO in mid-summer 2017. The fees amounted to $15 million. A total of 200 million coins were issued. Half of them were sold to investors, the other half was distributed between sponsor investors and the platform management. The release of new tokens is not yet planned.
Instead of issuing, management has come up with a reverse process. Each quarter, the site will redeem coins in the amount of 20% of its own revenue and withdraw them from circulation by burning them. The process will continue until half (that is 100 million) remains on the market.
An interesting fact is that the number of tokens that will be withdrawn from circulation next time is never known for sure. It depends on the platform’s revenue. You can calculate it roughly based on the trading volume. Therefore,it is also impossible to accurately predict at what stage 100 million will remain in circulation.
In April 2021, Binance burned over 1 million BNB worth a record $ 595 million, and in July it burned $ 393 million. According to Coinmarketcap, there are 168 million BNB in circulation at the moment.
Where to store BNB
After Binance coins are purchased, they go to the built-in BNB account. You can store them there for transactions, the commission will be automatically paid in coins. To do this, you need to go to the user profile and enable the option “Pay commissions using BNB”.
If you decide to withdraw BNB from the exchange, the https://bnbwall.com/ web wallet running on the BEP20 network will do. This wallet, despite its seeming simplicity, is very functional and secure. It is also important that the developers have provided it with detailed instructions that are designed to simplify the work with the wallet as much as possible and save the user from losing funds.
You can also use various multicurrency wallets, but it is important to find out the network standard that they use. For example, the Exodus desktop wallet allows you to create coin wallets for all three Binance networks, while Atomic Wallet only uses the ERC20 network. The most annoying thing is that you can only find out about this when you send coins to the BEP20 wallet, which has a similar address format, and they simply do not reach the recipient. So be careful!
Where to get BNB
You can only buy BNB only on the exchange itself. You can purchase it like a regular cryptocurrency by choosing from the list of traded pairs. BNB trades with Bitcoin, Ethereum, Litecoin, Iota, etc.
At the start of the sale, Binance (BNB) Coin cost $ 0.11, today its value hovers around $ 469, and the token itself settled in third place in the capitalization rating according to CoinMarketCap. At the beginning of 2021, the cryptocurrency was worth only $ 37, that is, in a period of less than 10 months it increased in price more than 10 times. This was due to the jump in the Bitcoin exchange rate, the general popularization of cryptocurrencies, the frenzied growth of the Binance exchange and its entry into the top of the trading platforms. Binance takes the lowest exchange commission among other exchanges – 0.1% of the amount. The trading volumes are impressive, everyone wants to buy BNB to save on fees. When demand grows, so does the price.
Forecasts and prospects
Let’s speculate what awaits the Binance coin cryptocurrency. The gradual withdrawal of tokens from circulation in the absence of emission will increase their price according to the laws of the market. Demand is growing, there are no more coins, on the contrary, even less.
There is real business behind the coin. Most startups enter ICOs with nothing but an idea, the success of which is often questionable. BNB, on the other hand, is closely connected to a successfully operating exchange, and is a part of it. This means that the well-being of the coin depends on the development of the exchange.
According to Changpeng Zhao, CEO of Binance, the company plans to introduce self-regulation and achieve a leading position among similar crypto exchanges. If this happens, the coin will rise in value again. This makes us conclude that Binance coin is an attractive asset for investment.