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Anatomy Of Binance Coin (BNB)

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Binance Coin (BNB)
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Introduction to BNB

Binance was established in 2017 by Changpeng “CZ” Zhao, a developer who had previously created software for high frequency trading. Binance was originally located in China, but later relocated its headquarters to Singapore just before the Chinese government implemented regulations on cryptocurrency trading.

Today, the Binance exchange, which is the world’s largest cryptocurrency exchange has an imposing daily trading volume of $5-6 billion across c. 400 different cryptocurrencies and 1,300 trading pairs.

Binance Coin (BNB), is the cryptocurrency minted by Binance to enable seamless trading and efficient fee payment on its exchange. BNB also serves as the core cryptocurrency coin empowering the dynamic BNB Chain ecosystem. As an incredibly popular utility token globally, BNB offers users immense value across diverse applications and a multitude of use cases.

Foundation and Evolution

BNB was originally an offspring of the Ethereum network and therefore an ERC-20 based token. However BNB has since matured to become the cornerstone of its proprietary blockchain, Binance Chain.

Binance unveiled BNB to the world in July 2017 via a fairly disappointing Initial Coin Offering (ICO). Envisaged with a ceiling of 200 million tokens, BNB's distribution was well-orchestrated: angel investors got 20 million coins, the visionary team behind Binance got 80 million, and ICO participants had access to 100 million coins.

At that time, nearly half of the financial infusion from the ICO was earmarked for building Binance's brand persona and platform optimization.

What is BNB Used For?

As the native token/cryptocurrency powering transaction and trading fees on the Binance platform, BNB serves multiple purposes within the Binance ecosystem:

  • Trading Fee Discounts: Initially, Binance users could use BNB to pay for trading fees on the exchange and receive a discount. This feature incentivized the use of BNB and helped establish its initial value.
  • Binance Chain & Binance Smart Chain: BNB is used to facilitate transactions on the Binance Chain and its parallel blockchain, Binance Smart Chain. The latter supports smart contracts and is compatible with Ethereum-based applications, allowing developers to deploy decentralized applications (dApps) and tokens.
  • Initial Exchange Offerings (IEOs): Binance Launchpad, the token sale platform of Binance, often requires participants to use BNB to buy new tokens.
  • Payments and Transactions: Over time, BNB’s use-cases have expanded beyond the Binance platform. Many merchants accept BNB as payment, and several other platforms recognize BNB for services, such as booking travel or entertainment.
  • Crypto Dust Conversion: Binance offers a unique feature where users can convert residual tiny amounts of other cryptocurrencies (often termed "dust") into BNB.

While BNB's genesis was rooted in discounted trading on Binance, its utility canvas has expanded dramatically fuelling transactions on platforms like Binance.com, Binance DEX, and Binance Chain.

Furthermore, its versatility spans across various spheres: entertainment (from virtual goodies to card packs), online services like BitTorrent and Canva, financial avenues like Aave (formerly ETHLend), and even travel bookings on various platforms.

Burn Baby Burn

An intriguing facet of BNB is its ever shrinking supply which today stands at just over 150 million coins in circulation with a stated maximum of 200 million. Every quarter witnesses Binance channeling a fifth of its earnings to repurchase and obliterate a portion of BNB, a process termed as "burning". This helps to keep supply in check.

To illustrate, the latest ritualistic BNB incineration occurred on April 14, 2023, erasing 2,020,132.25 BNB, equivalent to a staggering $676.7 million, marking the 23rd instance of such an event. Here are the main reasons for doing this:

  • Supply Reduction: Burning reduces the total supply of BNB, making each remaining coin potentially more valuable due to scarcity.
  • Value Appreciation: By decreasing the number of BNB in circulation, Binance aims to support or potentially increase the coin's market value over time.
  • Incentive Alignment: The burn aligns the interests of the company and BNB holders. If Binance profits, they buy back and burn BNB, which could lead to price appreciation, benefiting long-term BNB holders.
  • Transparency Commitment: Binance commits a portion of its profits for the burn, showcasing its financial health and profitability to the community.
  • Utility Preservation: As the BNB token has various uses within the Binance ecosystem, the burn ensures that the token remains valuable and desirable for those utilities.
  • Trust Building: Regularly scheduled burns show that Binance is committed to its roadmap and promises, fostering trust within its user base.
  • Demand and Supply Dynamics: By adjusting the supply side regularly, Binance can influence the demand-supply dynamics in favor of a price increase, given steady or increasing demand.

Why is BNB So Important?

Binance's position as one the world’s top cryptocurrency exchange means that its native token wields considerable influence in the crypto space.

The introduction of Binance Chain and Binance Smart Chain has allowed BNB to evolve beyond just a utility token for the exchange. It's now foundational to a growing ecosystem of dApps, tokens, and projects.

For investors and users, BNB offers an opportunity to diversify cryptocurrency holdings, especially as Binance continues to expand its services and offerings.

BNB’s Present Value and Pricing History

Since its launch, BNB's value has seen significant fluctuations, common with many cryptocurrencies. Originally issued at $0.10 per token during its ICO, BNB experienced meteoric rises, surpassing the $600 mark in 2021. Its price has been influenced by various factors including Binance's growth, crypto market trends, and strategic token burns (where Binance periodically buys back and destroys BNB to reduce supply).

At the time of writing this article, BNB was trading at $205 with a total market capitalization of $31.5 billion and a daily trading volume of $333 million.

Conclusion

BNB is not just another cryptocurrency; it's a testament to Binance's vision, strategic prowess, and adaptability in the ever-evolving crypto arena. With its vast utility, continuous innovation, and expanding partnerships, BNB is poised to remain a linchpin in the crypto world. However, we must acknowledge that there is absolutely zero certainty of this and past performance is not an indicator of future success in cryptopia.

Note: Binance Coin (BNB) is fully integrated into Savl Wallet where users can send, receive, buy, swap and hold BNB.

DISCLAIMER: All cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don't invest unless you're prepared to lose all the money you invest. The contents of this blog post do not constitute financial, legal or investment advice of any nature and are simply a reporting of publicly available facts and data. Savl does not and will not make financial or investment recommendations EVER. Your capital is always at risk.

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