What is Binance Coin & How Does it Work? - BNB for Beginners

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?

Quick Transactions

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.

Trading Discount

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.

If you’re interested in buying then be sure to check out our how to buy Binance Coin guide, you can also follow the Binance Coin Price here and look at our prediction for the price of Binance coin.

Why Should You Invest?

If you are looking to invest in Binance Coin or any other altcoin, make sure you know the underlying cause of your investment. There is a multitude of reasons why people trade BNB and other tokens.

• You want to earn passive income by trading the BNB tokens and other cryptocurrencies.

• You want to make a long-term return on your investment by holding the BNB tokens for a while.

• You want to park your capital in a safe and reliable decentralized network.

• You believe in the Binance Coin project and want to support it with your finances.

Don’t forget that different investors have different objectives when it comes to trading and you need a unique and well thought out strategy to achieve them. This is why it is crucial to identify why you would want to invest in BNB.

Price and Volatility – Why Is the Price So Volatile?

When it comes to cryptocurrencies, there is no strict single-handed and centralized supervision such as a monetary policy by the State Bank. This means that they are totally driven by the market forces and sentiment which results in high volatility due to a wide range of factors including regulations, technology updates, opinion pieces, virality, or social acceptance. Having said that, BNB has been one of the more stable cryptocurrencies out there since it is a native coin of an established trading platform.

This means that while there is enough volatility to earn profits, it’s still relatively stable as compared to the other tokens which can see massive plummeting and surges within hours.

Where to Buy Binance Coin

BNB is offered by many cryptocurrency exchanges and naturally the best place to purchase it is the native Binance platform. However, if you are looking for other options, you need to take different factors into account including fees, user-friendliness, customer support, and reputation. Three of our favourite and vetted trading platforms are listed below:

• eToro – One of the top social trading websites that offer cryptocurrency CFDs and makes the experience swift, convenient, and affordable. With the ease of use, professional analysis, and economical fees, eToro is one of the best options.

• FXTB – Another reputed platform that was created for forex trading but has leveraged its exceptional market position to become one of the best cryptocurrency exchanges for buying BNB.

Where to Store Binance Coin

When you purchase BNB, you cannot hold it in the exchange’s account for long periods as it’s quite unsafe. It means that you will need a more secure and robust option i.e. cryptocurrency wallets which are specially designed to store all types of tokens.

What Are Wallets?

Cryptocurrency wallets are physical devices or software programs with the capacity to securely hold a wide variety of tokens and digital assets including Bitcoin, Dash, Bitcoin Cash, Iota, Ethereum, Chainlink, Tezos, Monero, Ripple, and more. They have modern security features to keep your funds safe and secure for longer periods.

What Types of Wallets Are Available?

When you are searching for the best wallet to store your BNB tokens, you need to review multiple options.

Web Wallet

Web wallets use browser extensions or are built into the cryptocurrency platform that is easily accessible through your credentials. They are user-friendly but don’t have a lot of security features. 

Mobile Wallet

If you are looking for more portability and want to trade on the go, then what you need is a mobile wallet. Mobile wallets are offered as iOS or Android apps that you can install on your phone to store your crypto coins. These wallets offer reasonable security and set of features. Some of the Binance mobile wallets include Atomic Wallet, Exodus, and Coinomi Wallet.

Desktop Wallet

These are software programs which you can install on your Windows or macOS computer to store your tokens. They bring more security features and offer built-in trading which can be quite useful for traders. Coinomi, Exodus, and Atomic Wallets are good options.

Hardware Wallet

If you prioritize security over everything else, the best bet for you is a cold or hardware wallet. They are completely disconnected from the outside networks which can make devices vulnerable. They also offer leading security features such as passphrases and 2FA. You can use Ledger Nano S and Trezor to store the Binance Coin.

Wallet Combinations

You also have the option to combine different types of wallets to get the best features of a variety of wallets including reliability, security, convenience, and ease of use. You can use Ledger Nano S in combination with the Atomic wallet. 

Storing Your Wallet on an Exchange, the Potential Upside and Downside

Although there is nothing inherently wrong with storing your BNB in an exchange’s account, it is not the best idea to keep your tokens there for longer periods. While crypto exchange wallets deliver improved user experience, ease of use, and swift accessibility, they don’t have the best security. Apart from that, if the website is temporarily unavailable or experiences a hacking attempt or a security breach, your BNB tokens will either get stuck or may get stolen.