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What is Binance Coin (BNB)?

and the Dual-Blockchain Structure behind Binance

While the Coinbase IPO last week has grabbed the attention of retail investors, Coinbase is undoubtedly not the only major cryptocurrency exchange out there. One exchange that has grown tremendously since its launch in 2017 is the Chinese exchange: Binance.

To finance the creation of the Binance exchange, the team raised funds in 2017 through an ICO in which investors would receive BNB tokens in return. The token was initially issued on Ethereum as an ERC-20 token, but since the inception of Binance Chain in 2019, holders could switch their ERC-20 tokens 1:1 for a token on the Binance Chain (BEP-2).

Traders can use Binance Coin (BNB) to receive a discount on trading fees. Initially, the discount received was 50%, but this discount is halved annually and completely disappearing after the 6th year. Nevertheless, BNB has seen a tremendous rise in its value, surpassing the appreciation of major cryptocurrencies like Bitcoin or Ethereum manifold. Apart from using BNB to receive discounts, traders can also use it to access projects that are launching on the Binance Launchpad, for staking or to pay for bills and services through the partner network of Binance.

Binance Chain & Binance Smart Chain

What’s interesting about the setup of Binance is its dual blockchain structure. Many exchanges run on one blockchain enabling trading; however, Binance combines Binance Chain and Binance Smart Chain.

The exchange was built on top of Ethereum until Binance launched its blockchain: Binance Chain — a fork of tendermint and Cosmos. This blockchain allowed for permissionless trading and is powering the Binance DEX.

With the growing interest in decentralized Finance and developers increasingly building dApps, the Binance team ventured on to create yet another blockchain that would allow additional programmability. That’s how Binance Smart Chain (BSC) was born and released in 2020. Binance Smart Chain stands out with very short block intervals (3 second block time), low transaction costs averaging at 20gwei and cross-chain compatibility.

As Binance Smart Chain is compatible with the Ethereum Virtual Machine, developers that built a dApp on Ethereum can quickly move that dApp to the Binance Smart Chain. As Ethereum gas fees continue their steady increase, several notable projects have moved from Ethereum to BSC, including the DEX: IDEX. Until today, the top dApps powered by BSC are decentralized exchange platforms and liquidity providers such as JulSwap or PancakeSwap.

To incentivise projects to build on or switch to Binance Smart Chain, Binance has pledged $100 million to support projects developing on BSC.

One of the biggest criticisms of the Binance Smart Chain is that it’s pretty centralized and controlled by one of the biggest exchanges. With proof of authority consensus algorithm and just 21 validators, there’s room to discuss how “decentralized” that is. Compare that to Ethereum with 33,700, and one could conclude that it’s, in fact, not very decentralized at all.

Nevertheless, this is a trade-off one has to accept for low block time and low transaction costs.

BNB Price

We can’t talk about Binance Coin without mentioning the recent price performance. At the beginning of this year, BNB was trading below $30 and is now trading at around $500, marking a 16-fold increase in its price in less than half a year.


One event that might be fuelling this rise on top of the ongoing bull market is that Binance is buying back and burning tokens to maintain value. As simple supply and demand dynamics go, the fewer tokens are in circulation; the more valuable is a single token. This does bear some similarities with companies equity programs and might earlier or later catch the attention of regulators. So far, Binance has managed to avoid too much regulatory scrutiny, but it’s certainly a possibility savvy investors should keep in mind.

Nevertheless, it does look that Binance is already benefitting big time from the increasing interest in cryptocurrencies, which is reflected in the token price. If they manage to stay out of trouble and get more developers to build on BSC, BNB might continue appreciating.

BNB is now trading on Exchange with USDT, ETH and BTC pairs.



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Naomi Oba

Naomi Oba

Writer in Crypto — passionate about financial education, blockchain, books, and food.