What Is Binance Coin (BNB)?

Binance Coin (BNB) is the utility token for Binance, one of the largest cryptocurrency exchanges by volume. Traders can use the token to pay fees on the platform, and developers can use it to power applications, like smart contracts, on the Binance Smart Chain (BSC).

As one of the top five cryptocurrencies by market cap as of April 2022, BNB has developed many use cases and real-world applications. But this crypto platform has also faced regulatory hurdles here and abroad.

If you’re thinking about buying BNB, here’s what you need to know.

How Does Binance Coin (BNB) Work?

Over the years, the Binance platform has launched a decentralized exchange (or DEX), a peer-to-peer (P2P) crypto trading option, and two blockchains that run parallel to each other: Binance Chain (BC) and Binance Smart Chain (BSC).

Note that the original Binance exchange is considered a centralized exchange (CEX) vs. the DEX, which launched in 2109, and allows users to trade with one another.

What is BNB, then? Binance coin (BNB) is the native token minted in 2017 to raise money for the platform. Still, it has since expanded in tandem with the different iterations or evolutions of the Binance platform itself. In one way or another, BNB is an integral part of most Binance-based transactions.

Discounted Trading Fees

First and foremost, BNB gives users a substantial discount on trading fees (when users hold BNB and pay platform fees in BNB). Last year Binance announced that the long-standing 25% trading fee discount would remain in effect until July 13, 2022, at 11:59 pm (UCT).

As Binance has grown, BNB has become integral to paying for transactions — including dApps and smart contracts — across the Binance blockchains.

Real-World Payments

Similar to other forms of crypto, merchants may accept payments in BNB: to book travel or entertainment and to pay for online services.

Using BNB to Invest

BNB may be used on some platforms to invest in stocks, exchange-traded funds (ETFs), and other assets. In some cases, BNB can be used as collateral for loans.

You can also use Binance coin to invest in initial coin offerings (ICOs) listed via Binance’s Launchpad program.

Consensus Mechanism

Although technically, the Binance platform and BNB operate in the DeFi space; the Binance ecosystem overall is considered somewhat centralized.

First, Binance is a centralized exchange. And the platform uses the Tendermint Byzantine Fault Tolerant (BFT) consensus mechanism, a network of several nodes (validator, witness, and accelerator). But transactions are confirmed by just 21 validators who need to stake their own BNB and, in return, get BNB tokens.

Validators take turns to validate blocks and must be re-elected daily. Hence the concerns about too much power being concentrated in too few hands.

Advantages and Disadvantages of Binance Coin (BNB)

When asking, What is BNB crypto, it helps to consider the pluses and minuses. BNB is a relatively straightforward type of crypto. Likewise, its pros and cons are pretty clear-cut.

Advantages

The main advantage of Binance is that it enables discounted trades on the Binance platform. You can use BNB to pay for other features on the Binance Chain (BC) and Binance Smart Chain (BSC), like the execution of smart contracts and the creation of dApps.

Users can also stake BNB to earn interest, and a unique reinvestment feature offers to compound for holders, as they say in crypto terminology.

In addition, BNB has several real-world applications, especially in terms of digital payments.

Disadvantages

Despite the appearance of decentralization, Binance operates fairly centrally, especially in its oversight of BNB. The reality is that a relatively small group of validators run the network and own most of the BNB on the DEX — a setup that could add to the platform’s vulnerabilities.

One specific vulnerability is that Binance has hit regulatory hurdles in the U.S. and abroad: in the UK, Germany, Japan, Malta, and Ontario, Canada. Regulators in the UK banned Binance in 2021 (although in early 2022, a subsequent partnership was announced between Binance and a UK payments platform that permitted BNB transactions).

Who Created Binance Coin (BNB)?

Binance coin was created by the launch of Binance itself in 2017, led by CEO Changpeng Zhao (sometimes called “CZ”). At the time, Binance Coin had a successful ICO of 100 million BNB.

Binance Coin has a fixed supply of 200 million tokens, with some 165.1 million tokens in circulation as of April 2022. The network conducts quarterly burns to sustain BNB’s value.

Why Does Binance Coin (BNB) Have Value?

When Binance launched in 2017, BNB started as an ERC-20 token built on the Ethereum blockchain. But in 2019, Binance established Binance Chain (BC), its native blockchain, which also had a native BNB coin that users could swap out with their old ERC-20 tokens. Thus BNB is compatible with both blockchains, BC and BSC, which run parallel to each other — through BSC support DeFi features such as dApp and smart contract capability, which BC does not.

BSC can also work with the Ethereum Virtual Machine (EVM).

Interacting with either blockchain (BSC or BC) requires payment for network fees in BNB, keeping demand and liquidity relatively steady.

Binance spends some of its quarterly revenue to buy back and burn BNB, destroying them. Binance has performed quarterly burns since 2017 to sustain its growth and stability as they reduce the total supply to 100 million coins (or 50% of the initial total supply).

This method may increase prices over time, which may encourage price speculation.

Price of Binance Coin (BNB)

Binance coin (BNB) is worth $304.31 as of January 18, 2023. It has a market cap of $70.6 billion and a circulating supply of 165 million coins.

Why Use Binance Coin (BNB)?

Binance coin is pretty versatile. Using BNB reduces trading costs on the Binance network, and there are various ways the token can earn interest, as noted above.

Programmers can use BNB to build new applications (dApps) on Binance Smart Chain, which rivals Ethereum. But congestion has been a hurdle on that platform, which has worked to Binance’s advantage, fueling activity on BSC.

Today, BSC has emerged as one of the largest DeFi ecosystems, with scores of projects — but it still lags behind Ethereum, which has hundreds of DeFi projects. But the speed and lower fees on Binance could help the platform keep pace with Ethereum and drive the demand for BNB.

How Can I Buy Binance Coin (BNB)?

Since BNB is a competitor to some other utility (trading) tokens, you may have to do some research to find platforms that enable BNB trades. Also, be sure to review how crypto exchanges work, as well as any fees that may apply.

Step 1. Choose an exchange.

Set up a crypto trading account, then fund your account with a secure wire transfer from your bank or even a credit or debit card transfer (check with your bank in the case of restrictions). Fees may apply.

Step 2. Set up a wallet to store your assets.

Just as you might keep money in a physical wallet, cryptocurrencies are held in digital “wallets.” Be sure to select a crypto wallet that supports BNB.

Note that some crypto exchange accounts come with a custodial wallet, and there may be restrictions about moving your crypto off-platform.

Step 3. Trade BNB.

Once you’ve executed the trade, you can transfer your holdings to your wallet. If you plan to keep trading, you may want to leave your BNB there.

Sharing Personal Data

Depending on where you choose to trade your crypto, different platforms may require different forms of identification. Some exchanges adhere to Know Your Customer (KYC) rules, common standards that require investors to disclose certain information. Others may allow anonymous or P2P transactions.

Associated Costs

Similar to trading securities, there are fees to consider when trading crypto. Be sure to understand the associated costs of trading crypto on one platform versus another or using one form of payment.

How to Sell BNB

Once you’ve decided to sell your BNB, the next step is to cash out for a fiat currency like U.S. dollars (USD) or trade another type of crypto.

Step 1. Decide what to sell.

If you’re exchanging BNB for USD, the steps may be different than if you’re buying another form of crypto — or you may have to complete a more extensive KYC identification.

Step 2. Find the best price.

Crypto prices fluctuate by the minute, so do your research beforehand to know a good offer when you see one.

Step 3. Sell BNB.

Complete the trade and move your crypto (or cash) to your wallet unless you plan to keep trading on the exchange.

Step 4. Keep taxes in mind.

Remember that crypto gains are subject to taxes. Be sure to consider the tax implications of selling Binance coins, and consult a professional as needed.

? Bought high and selling low? See how you could benefit from crypto tax-loss harvesting.

Does Binance Coin (BNB) Have Staking?

Yes. Investors can stake BNB to earn interest. Depending on the level of risk and how long they want to lock up their coins, BNB traders can earn as much as 10% APY or more. Binance offers an “auto-subscription” feature, similar to a reinvestment program, that reinvests the interest you earn, thus compounding the growth over time.

The Takeaway

As one of the top five cryptocurrencies by market cap as of April 2022 and the utility token for Binance, Binance Coin (BNB) has expanded alongside the Binance ecosystem and developed a wide range of use cases and real-world applications.

Traders can use the token to reduce trading fees on the Binance exchange, and developers can use it to power applications, like smart contracts, on the Binance Smart Chain (BSC). Thanks to its versatility, BNB has relatively high liquidity and trading volume, which has helped maintain its value.

But this crypto platform has also faced regulatory hurdles here and abroad. And some people are concerned, given that Binance is a centralized exchange and one of the largest crypto trading platforms, that BNB is also reasonably centralized.

That said, the expansion of the Binance ecosystem to include a DEX, two separate blockchains, more significant support for DeFi apps, and more have provided BNB with room to grow.

Note: ZPEnterprises is not a licensed investor/financial advisor, but we are trying to share awareness of financial topics. Please do further research and work with a licensed financial advisor.