What is Binance Coin & How Does it Work? - BNB for Beginners
Binance Coin, denoted by BNB, is a native coin of the Binance cryptocurrency exchange that has been built on the Ethereum blockchain using the ERC20 token standard. Binance will issue a maximum of 200 million BNB tokens. Its primary aim is to fuel the exchange operations while providing convenience and affordability to traders and cryptocurrency enthusiasts.
The coin was launched in July 2017, through an Initial Coin Offering (ICO) which put 20 million BNB tokens up for grabs for angel investors, 80 million for the project contributors and the remaining 100 million for several people who participated in the ICO. The funds raised by selling BNB tokens were used for exchange development, branding, and marketing. A percentage of the investment was also spent on adding necessary upgrades to the Binance cryptocurrency exchange.
Why Was Binance Coin Invented?
It has been created to empower the cryptocurrency platform and fuel its operations to establish a sustainable ecosystem. The coin can be used for a multitude of purposes including paying the listing fee, exchange fee, trading fee, or any other charges that a user may incur on the exchange. In the first year, Binance offered a 50% trade discount which would reduce by half every next year with a discount ending from the fifth year.
The coin can also be used for IEO investments that are listed in Binance's Launchpad section. These new currencies will then be listed on the Binance crypto exchange, providing them with a full-featured marketplace for trading. Having a native currency will reduce dependency on traditional money which can cause delays and extra charges which put an additional financial burden on the end-user. This token provides a seamless experience while enabling users to save money on trades.
How Does Binance Coin Work and What Technology Is Behind It?
BNB is built on Ethereum blockchain and uses ERC20 tokens which can store and hold value. However, you can't mine tokens as they have been pre-mined and distributed through ICO. Tokens in circulation are used for discounted trading on Binance Exchange. The discount rate started at 50% in the first year, but it's scheduled to be cut in half every year.
By the fifth year, there will be no discount which will affect the value of the token. To counter the value deprecation, Binance has been buying back tokens and destroying them to reduce the supply. The cryptocurrency exchange plans to eliminate half of the tokens in circulation.
BNB also now has an incarnation on the Binance Smart Chain (BSC), Binance's own smart contracts blockchain.
Is Binance Coin Real Money?
The main objective of BNB is to fuel the operations of cryptocurrency exchange and empower the Binance ecosystem. Currently, the token can also be used for trade discounts. However, the promotion will no longer be there in the next few years. It can be used for paying for travel and hospitality services, but so far its acceptance as a viable currency is low. That’s why it can’t be considered real money, at least not yet.
Binance Exchange has a lot of financial and strategic backing, which can keep the token afloat for years to come. This means that the landscape of the dominant alternative currencies can change in the coming years. It won’t be a smart idea to bet against a token that’s supported by an exchange that carries out billions of dollars in crypto transactions every month.
At this moment, BNB is a viable currency replacement; in fact, it's not even close to Bitcoin or Ripple in terms of market acceptance. If you're looking for high liquidity for trading or any other purpose, you may want to get another digital currency.
Fees & Expenses
Since it is primarily created for internal exchange use and the coins have already been pre-mined, there's no fee associated with the network. However, when you purchase Binance Coin tokens or make any other trade on the Binance exchange, you've to pay 0.1% of the trading amount. If you pay for your trades with BNB, you will get a 50% discount. For instance, if you are going to purchase $100 worth of BNB through Binance Exchange using any other coin or conventional money, it'll cost you $0.10. However, if you are paying with BNB tokens, you will only have to pay half, i.e. $0.05 or 5 cents. This doesn't just apply to trading fiat currency but crypto also.
You can also use the currency on different services, especially travel and hospitality ones. Their service charges or commission fee are determined by the respective vendors or service provider.
What Are the Benefits of Binance Coin?
If you are using BNB to trade on the exchange, you will have access to the platform's proprietary matching engine which can support up to 1.4 million orders every second. You can always find the right trade, and using BNB makes it even quicker and reliable.
Secure & Trustworthy
Binance already has millions of cryptocurrency users and traders who rely on the platform and trust the exchange's security and protection features. The exchange uses a multi-cluster and multi-tier system framework and Secure Assets Fund for Users (SAFU) to keep your funds safe.
Trade Multiple Cryptocurrencies
Using BNB, you can trade more than 150 cryptocurrencies on the exchange relying on a fast, secure and affordable trade matching system. Apart from that, BNB also gets its own trading pairs to meet your specific trading requirements. You don't have to look anywhere else.
BNB also allows you to get a 50% discount on the trading fee. If you're purchasing $10,000 worth of coins, you will be charged $10 with conventional payment modes. However, if you use BNB, the trading fee will be reduced in half, i.e. you will only have to pay $5. This discount can be gained on either blockchains, both Binance Chain, and Binance Smart Chain when trading on the Binance crypto exchange
Spend Binance Coin
Apart from a seamless experience within the Binance ecosystem and trade fee discounts, you can also use BNB in many other different ways. It is accepted by multiple service providers, especially in the traveling and hospitality industry. Buy your meal or get your new house using BNB.
Participate in ICOs/IEOs
Binance Launchpad also hosts new token sales where you can use your BNB tokens to purchase a stake in a new and upcoming currency. Later on, these new digital currencies are added to the Binance exchange where you can trade them as well providing a complete and seamless experience.
Can It Be Used Anonymously?
It is challenging to maintain anonymity when you are using Binance Coin. Since the token is mostly used within the Binance ecosystem, you need a verified account on the exchange to use the currency. Binance complies with Know Your Customer (KYC) and Anti Money Laundering (AML) regulations which means it will ask you to provide personal information to verify your identity before making your account.
You can't use BNB on the platform without an account. If you are privacy-conscious, then you should try any other cryptocurrency like Zcash that uses deliberate methods to mask your identity on the blockchain and the transaction details.
Moreover, any digital activity using BNB can be traced by Binance itself, the government, and any competent hacker. The fact is if you are leaving a digital footprint behind, there is always a chance that people who want to find you will find you, especially if you are a frequent cryptocurrency trader.
How Safe Is Binance Coin?
It is built on the Ethereum blockchain, which uses cryptographical encryption to prevent data breaches and interception. Since the blockchain is decentralised, there is no single central hub that can be hacked to compromise the data. Apart from that, the Binance cryptocurrency exchange is a reliable name in the crypto space with its security features which add safety layers to keep your personal information and funds safe. These include two-factor authentication and SSL certified encryption. You can also use wallets to keep your BNB secure.
What Teams Are Working on Binance Coin Development
Binance is based in China and was founded by Changpeng Zhao, who was CTO of OKCoin. After the launch, Yi He also joined the Binance team who was one of the co-founders of OKCoin. Both have grown Binance exponentially since then, and it's currently the second-largest exchange in the world by trading volume. Since BNB is a derivative cryptocurrency that has been pre-mined and it's now being burned in large quantities to limit the supply, there are no current teams who are working on the development of the token itself.
Which Financial Institutions Are Invested in Binance Coin?
Binance has always had a lot of traction when it comes to attracting investors since the founders have already demonstrated the ability to create a fully functional successful crypto platform.
That's why Binance and BNB ICO attracted many leading investors and financial institutions including Vertex Ventures, Plutus21, Black Hole Capital, Funcity Capital, Sequoia Capital, Limitless Crypto Investments, Fundamental Labs, and more. However, today Binance has to face more competition which may hinder its way to get more funding.
Apart from that, it has also been able to establish relationships with many vendors, service providers, and merchants to allow its users to be able to use BNB tokens for making small to big purchases. Currently, Binance has partnerships in place with more than 100 different service providers, including travel, hospitality, real estate, and dining brands.
Binance Coin Mining
Binance Coin is pre-mined as 200 million BNB tokens were issued for use. In July of 2017, the company held its Initial Coin Offering (ICO) after allocating the total supply of tokens. Since all the tokens are already in circulation, there are no more coins to mine.
50% or 100 million BNB coins for ICO participants
40% or 80 million BNB coins for the founding team
10% or 20 million BNB coins for angel investors
In order to preserve value as the trade fee discount reduces every year, Binance has been burning the tokens to limit supply. So far, nearly 10 million BNB tokens have been destroyed in six phases.
Binance Coin Wallet
If you want to store your BNB tokens securely, you can use hardware or software wallets to do so. The official wallet for storing BNB coins is Trust Wallet. However, you can also store Binance tokens on Enjin Wallet, Ledger Wallet, Trezor Wallet, Jaxx, CoolWallet S, Metal Vault, BRD, Gifto, Request Wallet, Ethos Universal Wallet, WinQ, Atomic Wallet, Clay, Coinomi and Blox.io Wallet.
Is Binance Coin Worth the Investment?
One of the most promising things about Binance Coin tokens is that even if it doesn’t make it a viable currency alternative, its success doesn’t solely hinge on that. It can still be used within the Binance Exchange ecosystem for powering operations and digital asset trading, providing a seamless experience to the platform users. It’s one of those coins which have an inherent use.
That being said, cryptocurrency space can be quite unpredictable, especially when it comes to price fluctuations. If you are looking to invest in BNB or any other cryptocurrency, do so with great deliberation and caution to ensure your investment capital remains secure. You can’t understate the importance of risk mitigation.
Alternative CryptocurrenciesView more Cryptocurrencies
Frequently Asked Questions
BNB can be easily purchased on the Binance cryptocurrency exchange using debit or credit card.
The official wallet endorsed by Binance for storing BNB coins is Trust Wallet. Binance tokens can also be secured on Enjin Wallet, Ledger Wallet, Trezor Wallet, Jaxx, Metal Vault, BRD, Request Wallet, Ethos Universal Wallet, Atomic Wallet, Clay, Blox.io Wallet and more.
You cannot. BNB tokens have already been pre-mined and distributed. All of the tokens are in circulation. 50% of the tokens were reserved for ICO participants, 40% for the team behind BNB tokens, and 10% for angel investors.
Cryptocurrency prices are volatile. They depend on multiple unpredictable factors, and that can lead to unforeseen price surges and drops, which makes it a challenging investment vehicle. This is why it is necessary to exercise caution and minimise your risk by investing in safer options.
If you are buying BNB tokens from Binance, the standard fee is 0.1% of the trading volume. Using BNB tokens will give you a 50% discount. BNB tokens can also be used to pay fees on other trades within the Binance ecosystem.
You don't have as much versatility and accessibility as some other cryptocurrencies, such as the number of places that accept Bitcoin, but depending on what you want to purchase and your region, it is possible.
It has been built on the Ethereum blockchain, which is decentralised. However, Binance has some control over the currency for running operations smoothly on the crypto exchange.
BNB has been created explicitly to power Binance Exchange operations and trading to deliver a seamless experience to its users. BNB can be used to pay for transaction fees on both of Binance's blockchain technology, Binance Chain (BC) and Binance Smart Chain (BSC).