Introducing Binance coin
All about Binance coin
Introducing Binance coin: There’s no doubt a plethora of cryptocurrency exchanges out there.
A veritable bazaar of places to trade your favorite old coins.
However, anyone who has been crypto for more than 20 seconds will note that Binance reigns supreme.
Not only do they lead the charts when it comes to trading volume but they are constantly coming up with innovative ways to boost the utility of their own crypto BNB coin.
What is the BNB coin?
BNB is the cryptocurrency of the Binance exchange.
It was initially issued as an ELC 20 token back in the summer of 2017 during the Binance ICO.
However, since then, the coin has been transferred to its own blockchain, the Binance chain.
The thing to know about BNB is that it’s primarily used as a utility token within the Binance ecosystem.
What is a utility token?
Now as many of you will know many crypto projects have issued utility tokens for fundraising purposes.
However, few have provided any real utility.
Utility tokens basically adhere to three core principles.
Firstly, there is a finite supply of that token.
Secondly, there should be a clear and specific function for that token.
And finally, that token function needs to drive meaningful value to its stakeholders.
I’m going to level with you.
So many crypto projects claim to have utility tokens and these merely have a capped supply and no real function to them at all.
However, BNB absolutely crushes it when it comes to utility and acting as a fuel for the Binance ecosystem.
How can you use BNB coin?
Well, a ton of people trade on the Binance exchange.
So much so that the exchange is generating the most volume amongst all.
All that trade volume means that traders are paying fees.
Yes, Binance charge is only a small fee with the highest fee level being 0.1%.
However, the enormous amount of trade volume on the exchange does mean that this adds up.
In the last 30 days over one hundred and fifty-five billion dollars was traded on Binance.
Yes, that’s a billion with free Commerce chaps.
The result of this crazy trade volume was that Binance became the first-ever crypto exchange to reach over 1 billion in cumulative profit.
Binance basically offers a discount on trading fees if you pay them with BNB.
This is a clean and simple use case.
It’s a straightforward economic incentive and all you need to do is buy the BNB coin and get an immediate benefit.
If you stack all the possible BNB discounts by holding more than 11,000 BNB and paying your exchange fees in the coin, then you can reduce the exchange feet by around 75%.
Onto the next use case, I’m sure many of you have heard about initial exchange offerings or IEOs (Initial Exchange Offering).
For those that have not the only difference between an IEO and an ICO is that the capital raise for a project is exclusive to an exchanges ecosystem.
Binance basically kick-started that whole craze with its launchpad.
The launchpad meant that Binance could fund vet projects and then bring them into their exchange and expose them to Binance’s audience.
In essence, Binance would say we have this project and if you are a Binance user you can now invest in it.
The kicker to this was that the only capital investors could contribute to these fundraisers was Binance coin.
It was kind of similar to how a load of people bought Etherium to buy into ICO’s in 2017 and 2018.
The thing with Binancial launchpads IEO is that they were almost always oversubscribed by a massive amount and a load of people bought BNB in advance with the hope of getting involved.
This shows that the launchpad was a pretty genius idea in order to create demand and utility for BNB.
To give you an idea of the feeding frenzy finance unleashed there are videos of rooms filled with people smashing the button trying to get in on these IEOs.
Needless to say a load of Binance users missed out on their token allocation and were pretty unhappy.
That led to finance implementing a lottery system to participate in Launchpad IEOs.
In short users need to hold between 100 and 500 BNB in their Binance account over the entire 20-day period leading up to the lottery to get a ticket.
Those that helped between 100 and 200 BNB got one lottery ticket.
And people who had between 200 and 300 BNB got two tickets.
And so on until a maximum of five lottery tickets.
Win the buy announced lottery and you got a token allocation in the launchpad IEO.
Now while we’re on the IEO utility point it’s also worth noting that a number of other exchanges tried to replicate this model with their own exchange tokens.
Although not many have been able to replicate their success.
The Binance coin burn
Living on though remember that I told you earlier that Binance makes a lot of profit.
Well Binance originally committed to spending twenty percent of their profits every quarter to buy back BNB coins and essentially delete them from existence or burn them.
These BNB coin burns will happen until they’ve bought back 50% of all Binance coins and only 100 million BNB remains in circulation.
In January of this year Binance completed its second biggest coin burn in USD terms and its third in terms of BNB.
This basically removed another one point 11 percent of the circulating BNB supplied from existence.
These coin burns reduced the overall BNB supply on the market.
You can basically view them in the same light as share buybacks reduction in the outstanding equity of a company.
Now while we’re on this I did find an interesting tidbit in relation to this.
Binance change the original coin burn wording in their white paper in 2019 and replaced any mention of profits with trading volume.
One of the reasons for this could have been to distance BNB from securities talk.
However, that should not detract from the fact that Binance is still burning a heck of a lot of BNB every three months.
Binance Referral Program
For those that like making money online Binance offers a referral program with an initial commission rate of 20%.
However, Binance’s holding 500 BNB or more unlock a special affiliate commission rate of 40%.
Another interesting utility for BNB is Binance community votes.
In a nutshell Binance community members vote on the project they most want to be listed on the exchange.
The project with the most votes is then listed.
However, it’s not a simple matter of one vote for each Binance user Oh No.
Instead users get votes based on the amount of BNB coins they hold.
If you have 500 BNB then you will be eligible for ten votes.
That is still not the full extent of BNB’s utility though.
The token also has its own trading pair on the Binance exchange.
This means the coin can be used to buy and sell crypto too.
Any of you that have used a crypto exchange before we’ll probably know the annoyance,
of having tiny fractions of a coin left in your exchange wallets after a trade.
This is commonly referred to as dust and Binance has created the function to easily convert all that dust into BNB.
Now I’m not going to pick this up too much seeing that almost every crypto claims to be a store and transfer value.
Finally, Binance have also thrown their hat into the crypto lending ring and yep you can use your BNB coins to earn some interest.
However, it should be pretty clear now that BNB coin has a bunch of utility within and outside of the Binance ecosystem.
Binance has its own blockchain call you guessed it Binance chain.
The main purpose of this new blockchain is to act as a means for issuing and exchanging digital assets in a decentralized way.
It uses something called the tender mint BFT consensus mechanism and even has a dedicated application layer that runs on top of it.
Binance chain actually has three types of notes.
The first is something called a validator node which is responsible for maintaining the Binance chain and Dex data and validating all those transactions.
The fees are collected and then distributed amongst the validators.
In short you can view validators as a type of miner.
It should be noted though that the Binance chain network did get some flak for only having eleven validator nodes.
All of which have been pre-selected by Binance.
This led to claims that Binance chain was not truly decentralized.
Witness nodes make the majority of the nodes on Binance chain.
What’s important to note is that they do not take part in the consensus process or produced blocks.
Instead they take care of the witness consensus process receive transactions and broadcast them to other nodes.
Finally, we have something called accelerated nodes.
These basically provide a more secure and a quicker way to access Binance chain.
Unfortunately for those DAP developers out there you will be disappointed to note that Binance chain,
does not support smart contracts.
So you’ll have to stick to the lights of Etherium if you want to build your own decentralized apps.
What does all this stuff mean for Binances BnB coin?
Well the law of demand and supply dictates that low demand and high supply leads to an increase in price.
What by Nance’s quarterly BNB coin burns do is create a consistent reduction in the coins supply.
Yes, this will not happen forever however there are still around 55 million BNB coins to be burned,
to hit that 100 million circulating supply figure.
And Binance is not only pushing down the supply of B&B coin.
But it is also increasing the demand for it.
Regular traders like you and I have that simple economic incentive of buying BNB coin to benefit from reduced trading and withdrawal fees.
Crypto projects that want to be listed on Bonin’s are also incentivized to buy it through listing fee discounts.
Yes, I know that the craze for IEOs has subsided somewhat but projects like Wazirx have raised a few million dollars in funding just a few months ago.
That means that any launch planned fundraisers will naturally increase the demand for BNB.