What Is Binance Coin (BNB)?
Updated: April 14, 2022
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 a wide range of 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 that was minted in 2017 to raise money for the platform, but 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). In fact last year Binance announced that the long-standing 25% trading fee discount will remain in effect until July 13, 2022 at 11:59 pm (UCT).
As Binance has grown, BNB has become an integral part of paying for transactions — including dApps and smart contracts — across the Binance blockchains.
Real-World Payments
Similar to some 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
On some platforms BNB may be used 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) that are 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 different 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 fairly straightforward type of crypto. Likewise, its pros and cons are fairly 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 special reinvestment feature offers compounding for hodlers, as they say in crypto terminology.
In addition, BNB has several real-world applications, especially in terms of digital payments.
Disadvantages
Despite giving the appearance of decentralization, Binance operates in a fairly centralized way, especially in its oversight of BNB. The reality is that a fairly 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 there was a subsequent partnership announced between Binance and a UK payments platform that permitted BNB transactions).
|
Advantages |
Disadvantages |
|
• BNB can be used across the Binance ecosystem, particularly to reduce trading fees. |
• The Binance ecosystem is considered more centralized than some other crypto platforms, which might make BNB more vulnerable to fraud. |
|
• Users can stake BNB to earn interest. |
• Binance has come up against regulatory hurdles in a number of different countries, including the U.S. |
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 in order 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 own 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 — though BSC supports DeFi features such as dApp and smart contract capability, which BC does not.
BSC is also able to 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 revenue each quarter to buy back and burn BNB, totally destroying them. Binance has performed quarterly burns since 2017 in order to sustain its growth and its stability as they reduce the total supply to 100 million coins (or 50% of the initial total supply).
This method may lead to increased prices over time, which may encourage price speculation.
Price of Binance Coin (BNB)
Binance coin (BNB) is worth $426.63 as of April 8, 2022. 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’s. 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 with 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. You may want to leave your BNB there if you plan to keep trading.
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, a common set of 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 that may come with trading crypto on one platform versus another, or using one form of payment versus another.
How to Sell BNB
Once you’ve decided to sell your BNB, the next step is deciding whether you plan 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 so you 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 coin, 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 fairly centralized.
That said, the expansion of the Binance ecosystem to include a DEX, two separate blockchains, greater support for DeFi apps, and more, has provided BNB with room to grow.
More Crypto Guides
Related resources
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
SOIN0221036