The Beginner’s Guide to Binance Coin – What You Need To Know
A little more than 3 years have passed since its release, and Binance Coin (BNB) is enjoying both a successful evolution and a promising future ahead.
While you cannot mine it, you can use this utility token from Binance Exchange for online payments and buy virtual gifts on various platforms. Furthermore, you can purchase BNB with fiat currency at over 150 CoinFlip ATMs across the US.
If you are trading cryptocurrencies on Binance and aren’t using Binance Coins yet, you are missing out!
BNB serves as a loyalty token for all Binance traders that can use it to pay for transaction fees instead of using their digital assets.
With Binance Coins, not only can you keep your stash of Bitcoins and Ether unharmed, but you also receive substantial discounts in one of the most profitable trading processes on the market at the moment.
In full expectancy of its much-anticipated decentralized exchange (DEX), Binance is playing its cards wisely enough to become one of the most important players on the market. If you want to get on their winning team early on, investing in BNB is a must.
Binance Coin in a Nutshell
- Binance Coin (BNB) is a utility token for Binance Exchange
- Binance Coin was initially released in 2017 through an ICO
- BNB enables high-speed transactions between cryptocurrencies on the Binance Chain
- You may use BNB instead of digital assets to pay for transactions fees on Binance
- There are 200 million Binance Coins on the market at the moment
- The Binance developers aim to buy back and burn the tokens gradually
- The Binance Chain works as an improvement to Ethereum-based blockchains
- Binance lets you use BNB in over 40 trading pairs between the most popular cryptos
What is Binance Coin?
Binance Coin or BNB is a cryptocurrency token developed by Binance – the biggest crypto exchange in the world when it comes to the global amount of trading.
It first started as a token on the Ethereum blockchain, but it gradually migrated to the Binance Chain, where it plays a utility token. If you own BNB, you can use it to:
- Pay for trading fees on Binance.
- In token sales hosted on the Binance Launchpad
- As a payment method for vendors that accept it
- Binance aims to use plan BNB to become an even bigger actor in the cryptocurrency market.
By powering its decentralized exchange platform Binance Chain with BNB, Binance becomes an even more efficient intermediary in trading cryptocurrencies.
One of the main benefits of using BNB is that you won’t have to spend your digital assets on trading.
Instead, you may use Binance Coins to pay for the trading fees. In exchange, you will receive a discount relative to the value of your trade – a practice that will only last for the first 5 years since BNB’s official issuing.
A brief history of Binance Coin
The brain behind the token’s creation is the CEO of Binance, Changpeng Zhao. The Chinese-Canadian business executive has been in the cryptocurrency industry from its early dawn in Blockchain.info and OKCoin.
In July of 2017, Binance launched an Initial Coin Offering (ICO) to raise funding for its utility token, Binance Coin (BNB). The campaign came with just a few days before Binance Exchange opened up for trading.
BNB was issued as an ERC-20 token running on the Ethereum network, and contributors got to pay with fiat money or other cryptos for it, as follows:
- $0.1 for 1 BNB
- 1 ETH for 2,700 BNB
- 1 BTC for 20,000 BNB
The initial issuing consisted of a staggering supply of 200 million coins, out of which 100 million were offered in the ICO. The rest went to the founding team (80 million coins) and private angel investors (20 million tokens).
More than $15 million were raised in the initial coin offering.
With the surge in BNB popularity, its value also increased, reaching $24 at the beginning of 2018. As far as utility tokens go, Binance Coin remained quite stable throughout the year and always orbiting around a value of $10.
However, at the end of November 2018, BNB dropped to a historic low of $5.61. Next, it increased to $10.34 in February 2019 before jumping over the $17 mark only a month later.
Binance Coin reached its all-time highest value at $39 on June 22, 2019, and was stable at $30.02 at writing.
Eventually, half of the BNB in existence will be destroyed or burnt. Binance aims to buy back the tokens by spending 20% of its profit each quarter and destroying the remaining 100 million coins.
Cryptocurrency experts are optimistic about the evolution of Binance Coin and regard it as one of the few loyalty tokens that follow up on its promising potential and actually provide utility.
How does Binance Coin work?
All trades on Binance Exchange incur a standard fee of 0.1%. You may choose to pay these trading fees with your digital assets or with BNB. When you use Binance Coin, you get a special discount, which varies for the first 5 years onwards since the initial BNB ICO in 2017, as follows:
Year – Discount
- Year 1 (July 14, 2017 – July 14, 2018) – 50%
- Year 2 (July 14, 2018 – July 14, 2019) – 25%
- Year 3 (July 14, 2019 – July 14, 2020) – 12.5%
- Year 4 (July 14, 2020 – July 14, 2021) – 6.75%
- Year 5 (July 14, 2021 – July 14, 2022) – 0%
Binance gives you a reliable alternative to invest in BNB and trade more in its exchange system. The more Binance Coins you have, the bigger the special discounts you will receive until 2022, when they will end permanently.
Even though it began as an Ethereum-based (ERC20) token, BNB rapidly developed into a utility token for the Binance Chain. Contrary to the Ethereum blockchain, it does not support smart contracts.
Instead, Binance Chain uses the Tendermint byzantine-fault-tolerant (BFT) consensus mechanism, a democratic network of validating nodes. When a transaction takes place, community members that oversee it will divide into:
- Validator Nodes – select users that validate it
- Witness Nodes – users that acknowledge it and broadcast it
- Accelerator Nodes – organization users that increase the speed of the transaction
The resulting fees from the creation of new blocks are divided between all the participating nodes afterward.
How to buy and store Binance Coin
You cannot mine Binance Coins since all of them were already “mined” at the time of the ICO. Since it was created to enable transactions on the Binance Exchange, you only purchase BNB from there.
The first step into buying Binance Coin is to get a wallet for later storage. Due to its inception as an Ethereum-compliant token, BNB can be stored in a variety of wallets, such as:
Hardware Wallets – a physical device or a USB stick modified to support cryptocurrency and on which you can store your private keys offline. Some popular examples include:
Software Wallets – an online ledger wallet that come desktop user-friendly interfaces. Some of them are also suitable for iOS and Android-running devices. Some popular examples include:
Binance Web Wallets – a wallet hosted by the Binance Exchange. It should be a safe alternative if you don’t plan to own a lot of Binance Coins. You can create and access one here.
Binance Exchange supports a significant number of digital assets, including the most popular and best-performing ones, so you can buy BNBs straight from the source using Bitcoins, Ether, or XRPs. You may even pay for Binance Coin with your credit card or at CoinFlip ATMs in the US.
It is ideal to withdraw the BNBs to your wallet after each transaction. Like all cryptos out there, Binance Coin is also susceptible to value fluctuations and volatility. Trading cryptos involves excellent acuity and constant supervision of the market.
The advantages of using Binance Coin
- Profitable discounts on trading fees on Binance
- Increasing availability outside Binance Exchange
- The possibility to trade fiat currency for BNB
- Easy to access on desktops, HTML5, iOS, and Android-running devices
- High-speed transaction process
- Wide availability – Binance supports cryptocurrency trading for over 40 crypto pairs
- Inflation is kept under control through Binance’s buy-back policy of BNB tokens
- The high demand / low supply evolution in the next years makes BNB one of the safest investments in cryptocurrency
- BNB has a bright future ahead for cryptocurrency investors on Binance
The risks of investing in Binance Coin
- The lack of regulation could shut down Binance in countries with powerful economies like the USA, China, or Germany, thus making Binance Coin inaccessible to traders from those places
- Binance has inspired other exchanges to come up with Ethereum-compliant tokens and emulate the BNB success. This may result in a higher competition and potential devaluation shortly