What Is Binance Coin (BNB)? Basic Overview

If you regularly visit the CoinMarketCap website, you’ve likely become aware of a new coin which had been in third place for a number of weeks now called Binance Coin. But just what is Binance Coin? And should you make an investment?

What Is Binance Coin?

To understand what Binance Coin is, and how it works, it’s necessary to know how the Ethereum blockchain functions. This is because Binance Coin performs the same functions for the Binance Exchange that Ether does for Ethereum. Basically, Binance Coin is the currency that the Binance Exchange is run on and it’s used to pay all fees for transactions and listings on the platform.

Binance Coin runs on the Ethereum blockchain, and the token follows the ERC-20 standard. Like Bitcoin, Binance Coin has a hard cap of coins created, and that is 200 million tokens. The symbol for Binance Coin is BNB.

The History of Binance Coin

BNB was launched in July 2017 in the form of an ICO. 50% of all BNB was offered in the ICO to the public. The other 50% of tokens were divided between the angel investors and founding team at 10% and 40% respectively. The tokens were offered at a low price of just 15 cents per token during the ICO.

The Binance Exchange was launched just months earlier by CEO Changpeng Zhao, who previously worked for other blockchain projects such as Blockchain.info and OKCoin. Binance was founded in China, but discovered it too difficult to operate under the government regulations there, and moved their headquarters to Japan shortly after the launch of BNB. However, this wasn’t the last move for the corporate offices, and in March 2018 the company re-established itself in Taiwan before announcing it would be moving to Malta. As of the writing of this article they also have plans to establish offices in Bermuda, and the island of Jersey of the coast of France.

Although Binance is the world’s largest and most popular cryptocurrency exchange, they have unfortunately also been the victim of the large-scale hacks which often plague the decentralized world. On May 7th, 2019, there was a breach on the exchange in which hackers stole 7,000 BTC. This was done using a variety of attack tactics from phishing to viruses, which were able to circumvent the security checks the exchange had in place. Binance promised to reimburse users of all the coins which had been stolen.

Why Does An Exchange Need A Coin?

You’re probably wondering just why a cryptocurrency exchange needs a coin. And the main reason is just because of how exchanges function. When you wish to sell a certain cryptocurrency at a certain price, the exchange must match you with someone who wishes to buy that exact amount of cryptocurrency for the price you are offering. And this requires some work on the behalf of the exchange. And the fee you are charged for the exchange of currency is paid to the exchange for doing this work.

On Binance, you don’t have to pay fees in BNB, as you can also pay fees in the cryptocurrency you are buying/selling. So, why the coin then? Well, BNB was created first and foremost to raise capital when the company needed it most. But it was also created in the hopes that Binance could drive and maintain brand loyalty as the cryptocurrency world continued to grow and expand. And they incentivize their users to use BNB to pay fees by offering discounts for the first 5 years that the user exchanges cryptocurrency on Binance. The discount you will receive decreases over the course of the five years, starting at 50% discount the first year, 25% the second year, 12.5% the third year, and finally 6.75% the fourth year. There is no discount for users on the 5th year. But Binance hopes that at that point, the user will have become a regular of the exchange and will continue to trade regardless, hopefully paying fees in BNB.

The Burning of BNB

Because of the decrease in the benefits of using BNB over time, it’s only natural that it’s use case will decline. And when this happens, it’s value will also decline. Thus, the company has developed a plan to buy back and burn over 100 million of the coins to combat the depreciation. This will leave the total amount of Binance Coins in circulation at 100 million coins. As of the writing of this article, the burning has been going as planned and only 154 million BNB tokens remain.

Is BNB an Investment?

The answer to this question is not easy, as BNB was definitely created mostly to be used on the Binance platform to pay fees. But the token has also risen in value over time as cryptocurrency has become more popular. And as of April 5th, 2021, the coin is valued at over $300 per coin, which is a far cry from the 15 cents it was sold at in 2017.

Not only that, but there are people who believe in the investment value of the coin, especially as the company continues to buy back and burn more coins, making them a scarce commodity as more and more people become involved in the cryptocurrency world and look for an exchange to make their main exchange.

Does this mean you should invest in BNB? Not necessarily. An investment in BNB is an investment in the Binance company, which is a far cry from an investment in a digital currency such as Bitcoin. And when you invest in BNB, the success of your investment largely depends on the success of the Binance company, which is a centralized entity that can be affected by customer use and government regulations. This is why it is so important to have all the information about Binance company before you decide to invest, because you need to have all the information in order to make an informed decision.

Overall, Binance Coin is a token which plays an important part on the Binance exchange platform. And if you wish to invest in it, the choice is yours, but it is critical that you do all your due diligence before making an investment — so that you can know just what and who you are investing in.

This article was brought to you by the MintDice Probably Fair Bitcoin Games. Originally posted on the MintDice Blog.




MintDice’s Blog provides the best Bitcoin news today and gambling news to keep you up to date with what is important and trending.

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