What Is BNB (Binance Coin)? What To Know About This Crypto #CriptoNews

BNB (formerly known as binance coin) is the native digital asset of BNB Chain, a blockchain ecosystem with a wide range of use cases. BNB is a utility token, in that it is used in many different functions of BNB chain, which consists of the blockchains BNB Smart Chain, BNB Greenfield and opBNB.

What Is BNB?

As a utility coin, BNB serves several purposes. More specifically, users can harness it to pay transaction fees at a reduced rate and interact with projects on the platform. They can also use it in governance, leveraging it to make decisions involving projects and protocols.

In addition, users can stake BNB, helping secure the network and earning rewards in the process. To take part, users are required to lock up their BNB, meaning they can’t sell or trade it for a certain time.

Further, users can harness BNB to benefit from airdrops, where they receive digital assets associated with new projects. To benefit from this, users can subscribe their BNB to Binance Simple Earn, which will allow them to receive airdropped tokens from several different mechanisms.

Understanding BNB

History of BNB

Binance coin came into existence in 2017 when it was sold through an initial coin offering (ICO). A total of 200 million units of this digital asset were createdand 100 million were sold via the ICO. Another 20 million units were allocated to angel investors and 80 million were issued to the founding team. Originally, binance coin was an ERC-20 token available on the Ethereum blockchain.

In April 2019, Binance released Binance Chain, its own custom blockchain. That same month, the exchange revealed that it would allow users to migrate their binance coin to the new blockchain, and that it would create BNB tokens as the Binance Coin tokens were eliminated.

The Transition To Binance Chain And Binance Smart Chain

Binance Chain first came into existence in 2019. It was later renamed BNB Beacon Chain. Originally, the primary objective of Binance Chain was to support a decentralized exchange (DEX) and allow that exchange to support a significant number of transactions.

However, Binance Chain lacked smart contract functionality, so BNB Smart Chain, which allowed developers to implement smart contracts, was released to exist alongside it. Since then, developers have deployed thousands of dapps on BNB smart chain (BSC). At the time of this writing, there were more than 2,000 of these decentralized software programs on this particular chain.

Token Burns And Supply Reduction

BNB Chain burns units of the BNB token following a set of rules. Over time, the total supply of BNB will decrease to 100 million units, a 50% decrease from the original amount. The blockchain ecosystem uses several burning mechanisms. One is a real-time burning mechanism, which eliminates a fraction of the gas fee that exists in each individual block. BSC validators have the authority to determine exactly how much of this gas fee is eliminated.

The blockchain ecosystem also has a quarterly auto-burn, which is a function of how many blocks were created during a quarter and also the average price of BNB during that time frame. At the time of this writing, roughly 60 million units of BNB have been burnedleaving the total supply at approximately 140 million units.

Key Features of BNB

Native Token

BNB is the native digital asset of BNB Chain, a blockchain ecosystem capable of supporting many different types of activity. Users harness BNB for many different purposes, including paying trading fees, governance (making decisions about the blockchain ecosystem) and staking. Users can also receive airdropped tokens by subscribing their BNB to Binance Simple Earn.

Discounted Trading Fees

By harnessing BNB, users can reduce trading fees. More specifically, they can cut expenses for futures trading and spot/margin trading by as much as 10% and 25%, respectively. Users should keep in mind that obtaining some of the larger discounts involves trading significant amounts of BNB, whether that amount is measured in units of BNB or in U.S. dollars.

Burn Mechanism

BNB has a unique burn feature, which is designed to reduce the total supply to 100 million units over time. Binance Chain has multiple burn mechanisms, which are designed to gradually reduce the supply until it reaches its minimum level of 100 million units. By burning tokens, Binance Chain can potentially increase the value of these digital assets, assuming demand is unchanged.

Use Cases of BNB

Trading Fee Discounts On Binance

Users can leverage BNB to obtain reduced trading fees. More specifically, using the native digital asset of this blockchain ecosystem can cut futures trading fees by up to 10% and spot/margin fees by as much as 25%. However, users should keep in mind that steeper discount levels require significant trading volume.

Participation In Binance Launchpad

Interested investors can use BNB to take part in Binance Launchpad, which is a platform that projects can use to raise money by holding token sales called initial exchange offerings (IEOs). To take part in one of these IEOs, a user would need to subscribe (or tie up) a certain amount of BNB. Binance Launchpad, which was launched in 2019, helps mitigate many of the risks associated with initial coin offerings (ICOs). It also offers users access to exclusive sales of digital assets.

To take part in a sale of digital tokens, a user must subscribe (or lock up) their BNB during the subscription period. More specifically, they need to have BNB in their Binance wallet and then subscribe it to a specific token sale.

Participation In Binance Launchpool

BNB holders also have the ability to take part in Binance Launchpool, which rewards people for locking up their existing digital currency holdings. Interested parties can tie up their BNB, as well as specific stablecoins, in order to obtain digital tokens associated with specific projects. Users have the ability to select individual projects, lock up their BNB (or other digital assets) and then earn an expected annual percentage yield from Binance Launchpool, which Binance introduced in 2020.

Use In DeFi Projects

Having BNB allows users to interact with a wide range of DeFi projects. As of October 2024, more than 5,000 dapps were hosted on BNB Chain, according to a Binance blog post published that month. By having this native digital asset, users can take advantage of the aforementioned applications, which include decentralized exchanges or DEXes. Users can harness BNB to interact with these exchanges and pay their fees.

Benefits Of BNB

Myriad Use Cases

BNB has many different use cases as a utility coin and governance token. Users can harness it to interact with a wide range of apps. They can also use it to obtain discounts on transaction fees. As a governance token, users can harness it to make decisions involving potential changes to BNB Chain.

Exclusive Token Sale Access

Users can also leverage BNB to obtain access to exclusive sales of digital tokens through Binance Launchpad called IEOs. These offerings offer greater security than many of the ICOs that came before, which frequently suffered from problems like fraud.

Staking Opportunities

BNB also offers staking opportunitieswhere users can tie up their digital assets in exchange for rewards. By locking up your BNB, you can help secure BNB Chain’s network and also earn a regular yield.

Potential Risks Of BNB

Competition From Other Platforms

The crypto space is home to significant innovation, which has resulted in a wealth of new projects. At the same time, it poses a threat to more established platforms like Binance, and its blockchain ecosystem BNB Chain, which are vulnerable to competition from competitors both new and established.

A Speculative Asset

BNB can be considered a purely speculative asset. It does not provide investors with ownership rights in Binance. It is not like a share of corporate stock, in that it is not backed by the revenue or earnings of Binance. It also does not make fixed interest payments like a bond would. As a result, its value is based entirely on what people are willing to pay for it.

Regulatory Concerns

The regulatory environment surrounding digital currencies is fraught with uncertainty. While governments have offered some clarity, there are many matters that regulators have yet to flesh out. For example, while the U.S. Securities and Exchange Commission has singled out certain digital assets as being securities, it has not provided this clarity for all cryptocurrencies.

Bottom Line

BNB has many use cases and significant adoption, but at the same time, it is a purely speculative asset that is not backed by revenue, earnings, or guaranteed interest payments. Investors should keep these factors in mind when considering BNB.