Binance Coin (BNB) is the native token of one of the biggest crypto exchanges out there. In this article, we’ll explore what its functionalities are, how it has performed in the past, and whether it is a good investment.
- Binance Coin is the token developed by Binance, the largest crypto exchange in the world.
- Its ICO attracted more than $15 million from both retail and institutional investors.
- It is not that different from other platform-specific utility tokens.
- One of the top five cryptocurrencies of all time, it ranks #4, right after Bitcoin, Ethereum, and Tether.
What is BNB?
Binance Coin is the token developed by Binance, the largest crypto exchange in the world. It was first developed by Changpeng Zhao as an ERC-20 token but has since become the native token of Binance.
Its Initial Coin Offering (ICO) attracted more than $15 million from both retail and institutional investors. The funds raised from BNB were used in-house to develop the platform, launch new features, and remove structural flaws.
Why Does an Exchange Have a Native Token?
You might wonder by now why an exchange would need a native token. Valid question. To answer it, let’s look at the top functionalities of BNB. They are:
- Trading: This shouldn’t have come as a surprise. All cryptocurrencies, including BNB, can be traded on the open market.
- Paying transaction fees: Binance offers users a discount if users opt for BNB coins while paying their transaction fees.
- Investing: As investors, you can earn value from BNB when it appreciates over the long term. Word to the wise, though: Don’t do it willy-nilly. We have an entire segment on HODLing. Check it out here.
- As collateral for loans and transfers: Some platforms support BNB as collateral if you want to take loans based on your holding.
The BNB Whitepaper states that every three months, Binance uses its profits to buy back BNB coins and “burn” them, destroying them completely.
Why is this done?
Burning makes sure that the availability of BNB tokens remains scarce, and hence, its value is retained. When supply is decreased and demand remains constant, prices go up (Econ 101, I know).
Binance says it will continue to use its funds to buy back its native tokens and burn them until 50% of the total supply, that’s 100 million coins, are burnt.
Is it Like Any Other Crypto?
The answer is both yes and no.
Binance Coin is not that different from other platform-specific utility tokens. It enables payments and transfers, along with functionalities like:
- Making credit card payments;
- Paying for travel;
- Buying NFTs; and
- Donating to charity.
However, it is a little different because Binance employs exceptional tokenomics to make BNB more deflationary than other cryptocurrencies.
It also uses a large portion of its income to develop the BNB project and engage in numerous different spheres of innovation. This is evident from Binance’s growth as a crypto platform. Although the company started off as a crypto exchange, it has now turned into a full-fledged infrastructure services provider for blockchain users.
The Rise to the Top
Here are some cold, hard numbers for the nerd in you. They indicate BNB’s success and promise.
- Current price: $346 (approximately)
- Market rank: #4
- Current market cap: $57 billion
- Return on investment (if purchased at earliest known price): 3,00,000%
Clearly, BNB is a fundamentally strong cryptocurrency. Its rapid rise to the top in recent times can be attributed to its functionalities. They are:
Traders all around the world engage with platforms like Binance a LOT when trading cryptocurrencies. It is natural that they rack up a huge transaction fee bill at the end of every month.
Since Binance offers a discount on those transaction fees if paid through BNB, big-time traders with large transaction volumes can save a lot of money in the long run.
How much, you ask? Roughly $450 million, some estimates say.
Reliable store of value
Being the #4 cryptocurrency of all time for a really long time has got to amount to something, right? It is not only a functional project, BNB also attracts a lot of resources in its R&D; not to mention, it is owned by the biggest crypto exchange in the world.
Should you buy BNB? That’s your call, as it should be. No one can accurately predict crypto markets, because they are very volatile. We encourage you to do your own research on the coin and figure out if your risk appetite allows you to make BNB investments.
If you do decide to make an investment, though, here’s how you can do it with CoinSwitch in two simple steps:
- Buy BNB directly from CoinSwitch.
- Convert your INR to BNB on CoinSwitch.
Frequently Asked Questions (FAQs)
Does a BNB burn affect prices?
A token burn only affects the market prices if the coin burn affects the circulating supply in the market, not the total supply. Since Binance’s burn of BNB does not impact the circulating supply directly, the market doesn’t adjust.
What is the all-time high price of BNB? When did it hit that price?
The all-time high of BNB sits at $690. The coin hit this price on 10 May 2021, approximately nine months ago.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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