Binance is one of the most famous and popular cryptocurrency exchanges. Having started operations in 2017, the exchange began to grow rapidly and emerged as a leader in terms of trading volume.
The influx was so large (up to a million new users a week) that in January 2018 the exchange was even forced to temporarily close the registration of new users. Binance offers its users a wide range of services and features, so BNB tokens are popular with investors and are constantly increasing in value.
BNB issuance and burning
The company’s Whitepaper provides for the periodic burning (literally destroying) of tokens. On a quarterly basis, 20% of Binance’s quarterly revenue is allocated to redeem BNB tokens in the general market, which are then burned.
Thus, the total number of tokens in circulation decreases, which reduces the supply and causes the price to rise. So far (October 2021), there have been 16 burns; the last one was in April of this year.
Initially, 200 million BNB coins were issued. Now, after all quarterly burnouts, there are 168 million of them left. The plan is to bring that number to 100 million, after which all those 100 million will be transferred to the exchange’s own blockchain.
BNB Blockchain
Binance currently works with three blockchains: Ethereum (ERC20), Binance Chain, and Binance Smart Chain, and for all BNB is a native coin. Their task is to process transactions and smart contracts.
Binance Chain and Binance Smart Chain work on Proof-of-Stake consensus and node validators are rewarded with BNB tokens as commission on transactions included in the block (an explanation of how these blockchains work will be given below).
It is worth noting that there is no direct reward for the created block reward in BNB tokens in these blockchains (as in bitcoin, for example), as BNB were issued centrally, once and for all. Validators process transactions in blockchains and receive only commissions for them. In other words, validators are not involved in the issuance of the coin. Therefore, the BNB token can be called a deflationary asset.
How to store BNB
In addition to the actual account on the Binance exchange, tokens can be stored in third-party wallets.
Currently, many cryptocurrency wallets support BNB – Trust Wallet, Enjin Wallet, Coinomi, Ledger Wallet, and many others. If you prefer simple solutions and don’t like to bother with installing applications, use the browser-based wallet available at this link.
It’s very easy to use, but it does what other BNB wallets do. One nuance: the wallet works only with the BEP20 (Binance Smart Chain) network, which the developers warn about on the main page.
How to use BNB
The Binance exchange offers a wide range of token usage options for its holders:
- BNB is present in many currency pairs traded on the exchange – it can be used for cryptocurrency transactions;
- BNB can also be used in futures trading on the exchange;
- with BNB you can take credit – service ETHLend;
- investments with BNB – Moeda;
- stock trading – NAGA;
- buying fiat currencies with BNB – Bitcoin Suisse.
Binance Earn service and earning opportunities with BNB
A year ago, the exchange launched a separate service for earning, Binance Earn, in which users can earn income in a variety of ways with BNB.
Here are a few options for earning income on Binance:
- Floating rate accounts are analogous to a bank demand deposit. You can withdraw money on any day. Deposited funds are sent to other traders for margin trading, so the rate depends on profits from margin trading and total return over the last seven days.
- Fixed-Rate Instruments: Fixed-rate deposits are accounts opened only for a fixed term. Profits on them are higher than on fixed-rate accounts;
- Promotions – blocking of assets to receive income from staking. Such promotions are carried out by the Binance exchange in conjunction with other projects;
- Launchpool – a product from Binance to get new coins from other protocols; this is a type of so-called “yield farming”. Here it’s about giving BNB to other protocols’ liquidity pools and getting income from it.
- Binance Liquid Swap is also a kind of “liquidity pool”, but here the liquidity is sent to the pool of the Binance exchange itself. The liquidity will be further used by traders for trading and exchanging currencies;
- BNB Vault is a comprehensive product from Binance that allows you to earn assets with BNB in a single click. BNB Vault integrates various Binance products in order to maximize the income from BNB ownership.
What affects the value of a BNB token
BNB is among the top 3 cryptocurrencies in terms of market capitalization and is firmly in third place behind Bitcoin and Ethereum. As of October 2021, the currency’s market capitalization is $79 billion, and the value of one token is $470.
During 4 years after the ICO, the price of BNB grew from $0.1 to the current $470, that is, 4,700 times. The coin brought huge profits to early investors, and it looks like it will still bring its “X’s” in the future. In fact, Binance is now as firmly associated with the cryptosphere as Bitcoin and Ethereum.
The value of BNB in the future will be influenced by several factors:
- The general state of affairs in the cryptosphere;
- The development of the Binance exchange itself and the range of services it offers;
- the development of Binance Smart Chain as a platform for smart contracts.
Binance Smart Chain – the smart contracts every one is waiting for
Originally, there was only one blockchain running on Binance, Binance Chain.
It wasn’t geared for smart contracts, had limited functionality, and was only used to run Binance DEX and other native Dapp applications.
In September 2020, Binance Smart Chain was launched, which aimed to create functionality for smart contracts while maintaining the same bandwidth as in Binance Chain.
In addition, the new one has fast transaction processing – about 3 seconds. If Binance Smart Chain is popular and demanded by third-party DApps and smart contracts, it will be a major boost to the exchange and a strong driver of BNB price.
Validators in the Binance network
To define BNB’s role in the cryptosphere and its attitude in the cryptocurrency community, it is worth mentioning the exchange’s blockchains, their nodes, and validators. To become a validator and “raise” a node, you need to put the sum of 10,000 BNB (about $6.6 million) into the stack.
This in itself is an impressive amount, which not everyone can afford, but it is possible to organize pools of steaking and transfer their BNB to other owners of nodes.
When selecting validators, preference is given to those candidates who have more coins. The list of participants-owners of nodes is reviewed once a day.
However, not the very fact of high-cost nodes is a target for criticism by experts. Network Binance is criticized for its unclear mechanism for selecting validators.
There are 21 active validators in the Binance Smart Chain network. Each of them is assigned on a daily basis, and the assignment is handled by the Binance Chain network. According to Messari, each validator from Binance Chain has something to do with Binance, because there the blocks in the two blockchains are created in turn, as if in a predetermined order.
This suggests that Binance is not as decentralized as it seems at first glance, and there is a strong “centralized hand” in it. In fact, this was confirmed by Changpeng Zhao, the head of Binance himself.
He said that his exchange is a kind of addition to decentralized networks, rather than a competitor of classic DeFi. Zhao even suggested a special term for such phenomena as Binance – CeDeFi, i.e. “decentralized finance” or “centralized-decentralized finance,” whichever one likes. It is something in between DeFi and CeFi, as Zhao himself says.
CeDeFi as a new word in cryptocurrencies
The advantages of CeDeFi include low commissions in the network, ease of use for the masses, and available tools from the DeFi sphere – the banding platforms, DEX, etc. Thus, Binance can be called something like a “one-stop service” in the world of cryptocurrency for millions of people. Hence the popularity of the whole network and the growth of the BNB token.
It seems that in the future, these drivers will continue to play a major role in the price of the BNB token. In addition, the fact that users can create their own tokens in Binance Smart Chain also plays into BNB’s hands and strengthens its growth. Binance’s BNB token has managed to prove itself in the best way as a means of receiving crypto services at a discount and as a tool for generating returns from other projects.
Binance is now used by 17 million people around the world, and BNB is supported by the trust of all those people. Binance has managed to occupy a special place in the cryptosphere (or rather, created this niche) as something between decentralized and centralized finance.
Of course, to use Binance in full you have to go through the KYC procedure and give up anonymity, but for many users, this is not the decisive factor in choosing the exchange. On the scale of the many features and services from Binance, it wins over other exchanges. We think that the growth of the BNB token will continue, which will bring investors a solid income.
