The cryptocurrency BNB was created as a service token of Binance. Coins were launched simultaneously with the exchange itself in 2017. The rapid growth of quotations is due to the demand for the site itself and its ecosystem, including various DeFi and CeFi projects. By the beginning of 2022, BNB began to be used not only as utilitarian coins, but also as a means of settlement in its own right.
- History of the creation of BNB tokens
- Differences from other cryptocurrencies
- Advantages and disadvantages of BNB cryptocurrency
- BNB in Binance Chain and Binance Smart Chain blockchain
- How to earn and store BNB cryptocurrency
- BNB exchange rate outlook
The Binance blockchain on which BNB runs uses a consensus mechanism, Tendermint BFT. It is a simplified version of a protocol called Byzantine Fault Tolerance. Blockchain security is guaranteed as long as the number of validators working correctly exceeds 2/3.
Using such a consensus mechanism means that it is not possible to mine tokens using the principle used in bitcoin mining.
The blockchain on which BNB operates has a high transaction speed. This is achieved through a minimal set of features. The developers even sacrificed the ability to support smart contracts. At the same time, third-party blockchain projects are allowed to be deployed on the base chain.
Binance Coin at the beginning of 2022 has about 200 use cases. For example, tokens are used for the following transactions:
- Paying trading commissions for buying cryptocurrency on the Binance and Binance DEX exchanges. This is more profitable than paying the commission with the coins that the user trades, because the exchange gives a discount. But its size is reduced in half every year and soon this privilege will be canceled.
- Payment for transactions made in Binance Chain and Binance Smart Chain.
- Buying goods and paying for services using Binance Card or Binance Pay.
- Purchases and bookings on sites that accept cryptocurrency (e.g., Travala.com, Axie Infinity, etc.).
- Steaming at Binance Liquid Swap.
- Lending and trading, such as on Nexo or Bitcoin Suisse platforms.
Having this cryptocurrency in a person’s account entitles them to participate in tokenseals on Binance Launchpad. In addition, on the Binance exchange itself, you can buy almost any other coin for these tokens.
Binance is constantly burning its coins. This is done to protect against inflation and to raise the exchange rate. A new batch of tokens is destroyed once a quarter. Its size depends on the number of transactions made on the exchange during that period of time. Usually it is about 20% of the profit received on commissions. It is planned to continue the procedure until only 100 million tokens remain.
History of the creation of BNB tokens
The founder of the Binance exchange and the creator of BNB was Changpeng Zhao. He is a programmer from China. He is known for his work with Bloomberg and the Tokyo Stock Exchange. Zhao became interested in investing in cryptocurrency in 2014.
Other developers were also involved:
- Roger Wang
- James Hofbauer
- Paul Yankunas
- Allan Yang
- Sonny Lee
The tokens were placed through an ICO, but their purchase is not an investment in the Binance exchange. Initially, 200 million BNB were issued, which ran on the ERC-20 protocol. In 2019, there was a replacement for BNB BEP-2. In 2020, another variety, BNB BEP-20, appeared.
At the time of issuance, only 50% of the coins were distributed to ordinary users, with another 10% going to venture capitalists. The exchange was left with 40% of the coins. Of this share, 15% were reserved, and the rest were used for the development and promotion of the site.
BNB became the first utilitarian token of a cryptocurrency exchange. Subsequently, Binance’s experience in issuing its own coins was replicated by other exchanges, such as KuCoin.
Differences from other cryptocurrencies
A comparison of the key parameters of BNB and other popular cryptocurrencies, such as xrp, bitcoin, ethereum, is shown in the table.
|Parameter/Coin||Cryptocurrency BNB||Cryptocurrency XRP||Bitcoin||Ethereum|
|Possibility of mining||No||No||Yes||Yes|
|Limit of Coins||200 million (all already issued)||100 billion (all already issued)||21 million (creation in progress)||Not limited|
|Number of coins in circulation||166.8 million (constantly decreasing)||47.54 billion (growing)||18.9 million (growing)||118.9 million (growing)|
|Number of possible transactions per second||1.5 mln||1500||7||15|
|Interaction with global banks||Yes||Yes||No||No|
The table shows that the key difference of BNB is the speed of transactions. No leading coin can compare with it in this parameter.
Advantages and disadvantages of BNB cryptocurrency
BNB tokens and the Binance ecosystem are distinguished by the following advantages:
- A high level of protection against hacking and transaction security;
- low commissions (0,1% of amount);
- stable operation even under critical system loads;
- universality – you can buy and sell BNB for many cryptocurrencies;
- demand for coins outside of the Binance ecosystem;
- maximum speed of transactions in comparison with other blockchains;
- protection against inflation.
Coin is interesting because it is backed by a leading business project in the cryptocurrency market. At the same time, the coin already has a wide scope of application, not related to the Binance exchange itself. This provides a kind of risk diversification when investing in these tokens.
BNB has one recognized disadvantage. It is the lack of decentralization. Because of this, the cryptocurrency is considered potentially vulnerable. Over the years, Binance has been subjected to numerous hacking attacks. And although it is considered to be quite stable, it does not guarantee complete security in the future.
Also to the disadvantages can be attributed the prospect of the impact on the quotations of the world regulators. Given the close connection between the rate of cryptocurrency BNB and the success of Binance, concerns are caused by the claims to this exchange expressed by the U.S. Internal Revenue Service. They accused the platform of money laundering.
BNB in Binance Chain and Binance Smart Chain blockchain
Binance Smart Chain (BSC) is a blockchain designed to work with dApps (decentralized applications). It works in parallel with the main Binance Chain blockchain and is fully autonomous.
Its main advantage is the possibility to transfer to it projects already working in the Ethereum system. When launching a contract, whether it already existed in another network or a new one, as well as when performing crosschain operations, it is required to pay a commission to BNB. These coins work on BSC in the same way as ETH in the Ethereum blockchain.
How to earn and store BNB cryptocurrency
BNB cannot be mined. These tokens can only be bought on Binance itself and on several other exchanges, including:
- Trade Satoshi;
- ShapeShift, etc.
You can buy Binance Coin for any of 46 fiat currencies, paying by bank card or transfer. Coins can be earned at the expense of transaction processing fees by network validators checking blocks. There is a chance to get coins for free – on the crane sites, as well as during the actions, conducted by the exchange Binance.
You can earn by owning BNB cryptocurrency in two ways – through the growth of the exchange rate and through staking.
It is recommended to store these coins in a Binance account or in cryptocurrency wallets. You can use the BNB web wallet (BSC20) at the link. You can also use Ledger hardware safe or multi-currency services.
Prospects for the exchange rate of BNB
At the time of writing (January 2022), the price of the cryptocurrency BNB reached $358 and its capitalization exceeded $59.1 billion. This gives the coin the fourth place among all existing ones. The peak of quotations was in March-May 2021. The historical maximum of the rate is $676 per coin.
Although BNB token can be used to pay for goods, its rate depends primarily on the demand for Binance services. To see how quotes have changed over the past year, see the chart below.
The main factors for the coin’s growth in the future will be the rate of introduction of new Binance services, the demand for this exchange in the community and the bull market of the cryptocurrency in general.
Due to the speed of transactions and low commissions in the system, BNB tokens are considered even more promising than Ether.
In their reviews, experts predict the growth of quotations by 20% by the middle of 2022 and by 300% by 2023. But you should not rely entirely on such positive opinions – some analysts expected that the value of BNB will reach $1000 already by the end of 2021.
Also, we should not forget that cryptocurrencies are a highly volatile asset. Even if at the end of several years the forecasts are justified and quotes will grow, it does not mean that there will not be strong drawdowns during this time.