What is Binance Coin (BNB) and How does it Work?

2021/06/29 03:34:21

Binance Coin was initially created as a token that would offer an alternative way of paying for trading fees. However, as time passed, it has become much more than that - and the price performance of BNB surely attests to that.

What is Binance Coin?

Binance Coin (BNB) was initially created through an Initial Coin Offering in 2017. During its ICO, Binance Coin was traded at the rate of 1 BTC for 20,000 BNB or 1 ETH for 2,700 BNB. However, the fact that BNB was launched through an ICO does not mean those holders can share the profits of Binance, as the possession of BNB does not represent a share in the company.

The total supply of BNB during the launch was 200 million coins. Binance offered 20 million BNB tokens to angel investors, 80 million to funding institutions, and the extra 100 million was given to ICO participants.

Head over to our next guide to learn how to buy Binance Coin on KuCoin. If you already have BNB and want to trade it, you can do so on the KuCoin platform.

How does Binance Coin Work?

Binance Coin was initially an ERC-20 token that ran on the Ethereum network. However, this changed after the project migrated to its own blockchain called Binance Smart Chain. Binance Smart Chain (BSC) is a blockchain capable of supporting smart contracts that came to life as a response to Ethereum’s skyrocketing fees. Binance Coin is used to fuel the blockchain and act as its main currency.

Binance Coin Use Cases

There are multiple ways that BNB can be utilized. One simple way is to use the token to make purchases and pay for various products and services. Numerous stores now support BNB payments, which makes this cryptocurrency that much more useful. However, using it for purchases is not its main purpose.

The majority of BNB is currently used for the purposes of Binance as a trading platform, as well as Binance Smart Chain as a blockchain. First off, any transaction on the Binance Smart Chain requires users to pay a transaction fee denominated in BNB. If you are a trader on Binance US Exchange, you can also use your BNB holdings to pay for trading fees. Binance coin fees will be deducted from every trading activity that you take part in. Binance performs token burns on a regular basis in order to bring more value to its users.

BNB Burning

Binance Coin’s whitepaper states that the exchange is to set aside 20% of its profits to buy back BNB tokens and burn them every quarter. The firm has consistently upheld the quarterly burn and it will continue to do so until 50% of the entire BNB supply is burnt. The burning process makes the token scarce and protects its value.

The recent burn took place on April 15, 2021, when Binance burned 1,098,888 BNB. This was the 15th quarterly burn for the firm and the largest one yet. The total supply for BNB tokens currently stands at 169,432,937.

Is Binance Coin Real Money?

The main purpose behind the development of Binance Coin is to empower the Binance ecosystem. However, the token can also be used for paying for services such as travel. However, its acceptance as a medium of exchange remains relatively low.

The technology and financial backing of the coin are strong enough to make it remain afloat, at least for the foreseeable future. However, the possibility of using BNB as a viable replacement for real money is low and its adoption does not come close to digital assets such as Bitcoin.

Should I Buy Binance Coin (BNB)?

Market analysts have issued Binance Coin predictions that reveal that the currency may be a good investment fit. Binance Coin is expected to be among the best performing tokens as long as Binance Smart Chain keeps taking Ethereum’s market share in terms of the number of decentralized apps built on it. However, because of the market volatility, it remains to be seen whether the Binance Coin news predictions will happen.