Introduction
Binance Coin (BNB) has been one of the most profitable investments of the last 4 years in the cryptocurrency market, registering returns of over 450,000%. An investment of $1,000 during its Initial Coin Offering (ICO) in July 2017 would have multiplied to a massive $4.5 million as of May 2021, when the coin reached its current all-time high. Few other coins have seen such return on investment (ROI) multiples over their lifetime. BNB is now ranked among the five most valuable digital assets with a market cap of over $55B. During its all-time high (ATH) date, it reached a market valuation of $103 billion. In the Binance ecosystem, another digital asset exists called the Binance Dollar or Binance USD (BUSD). It is important to differentiate between the two assets. Binance Coin (BNB) and Binance USD (BUSD) are not the same. Even though they are both issued by the Binance crypto exchange, they are fundamentally distinct and serve different functions. We will discuss more on BNB below, whereas BUSD is a stablecoin whose value is pegged to the US dollar currency. While the value of BNB is volatile, BUSD is designed to be as stable as the US Dollar, making it a hedge against price volatility in the crypto market. To learn more about the Binance exchange, be sure to read our comprehensive Binance review.
What is Binance Coin (BNB)?
BNB is a cryptocurrency native to the Binance ecosystem. Binance exchange is currently the leading cryptocurrency trading platform in terms of daily trading volume, and BNB is used to pay for trading fees, among other things, on the platform. The token was launched in July 2017 to be used as a tool for crowdfunding in the Binance ICO. As a utility token, it would enable its holders to claim trading fee reductions on the exchange once the platform launched. Binance raised about $15 million from the ICO, and over 100 million tokens of BNB were distributed to the public. Despite its humble background, BNB has grown to become more useful within the Binance ecosystem. In 2019, Binance launched the Binance Chain, a blockchain network on which it issued a new version of BNB tokens using the BEP-2 standard. In 2020, the exchange launched another parallel chain called Binance Smart Chain, on which it created, yet again, another version of BNB using a newer BEP-20 standard. There are, therefore, three versions of the BNB coin in the marketplace: ERC-20 BNB tokens (used during the ICO), BEP-2, and BEP-20 tokens. They are different versions of the same token, serving the same purpose. It is, however, important to differentiate between each to avoid losing your tokens between transfers. Binance no longer supports the ERC-20 version based on the Ethereum blockchain, and all holders of this version are advised to swap it for either of the other two. BNB in real-time:
The history of BNB
Binance ICO
Binance exchange launched in July 2017, but before the launch, the exchange needed to raise necessary funds to run the business. This is where the Binance coin came in handy. The Binance team, led by its current CEO Changpeng ‘CZ’ Zhao, conducted an initial coin offering to sell BNB tokens to interested investors. The ICO was held within three weeks, starting on July 1st and ending on the 21st. According to ICO documents, the BNB tokens were scheduled for sale in three phases, each lasting a week. The first phase happened between the 1st and 7th and saw the sale of BNB tokens at 2,700 tokens to 1 ETH coin. In the second and third phases, that rate was reduced to 2,500 and 2,300, respectively. This was a deliberate plan to create artificial urgency for investors to buy the tokens sooner rather than later. At the end of the token sale, all 100 million BNB tokens were sold off at an average of about $0.15, bringing in around $15 million.
Token allocation
According to the Binance whitepaper, only half of the 200M BNB tokens were sold to the public during the ICO. The other half was reserved for the Binance team and angel investors in a 4:1 split, respectively. Therefore, the founding team got an 80M token reserve, 20% (16M) of which was to be released immediately after the ICO, and the remaining amount to be released in equal batches of 16M for four years. The last batch was scheduled for release in July 2021. There are two main reasons for this type of token lockup. The first one is to control prices after the token sale period. It isn’t unusual to see steep price falls as soon as a token is listed following an ICO, and this is often caused by members of the founding team ‘dumping’ (or cashing out) their tokens in the marketplace. Due to a large number of sell orders, the market becomes saturated, leading to a massive fall in price. The second reason is incentivizing the founding team to keep working within the company or on the project. This way, the team member is motivated to work hard to ensure the value of their locked tokens keeps rising, and they stay with the company long enough to receive the tokens once the vesting period lapses.
Utility of BNB Tokens
As explained within the Binance whitepaper, BNB was created to serve as a means for platform users to pay their fees. The whitepaper lists the four uses of BNB as follows:
Exchange fees; Withdraw fees; Listing fees; Any other fee.
Note: To know more about the costs of cryptocurrency trading on the platform read our comprehensive Binance fees guide. BNB was initially created to serve as a utility token within the Binance exchange. In addition, the team devised a discount plan for token holders and early platform users in order to encourage participation in the ICO. The plan represented a graduated scale with a larger discount offered in the first year of operation and less in the fourth year. Even though the plan was to scrape off the discount rate after the fourth year, it seems the exchange has decided to keep it. Currently, all transaction fees paid using BNB on both the Spot and Margin markets are subject to a 25% discount, while those made in the futures market get a 10% discount. Note: Transaction fees can be paid in any coin or token, but the discount is ONLY applied if the fees are paid using BNB. By default, Binance deducts these fees from your BNB balance, but you can choose to turn this feature off in your settings, restricting the exchange from using your BNB balance to pay fees.
BNB Migration from ERC-20 to BEP-2 & BEP-20 Standards
Following the success of the trading platform, Binance opted to launch a new blockchain similar to Bitcoin or Ethereum dubbed the Binance Chain. It was released on the mainnet on April 23, 2019. Now that Binance had a blockchain of its own, it was only natural that it would issue new BNB tokens on the Binance Chain to replace those that were available on the Ethereum blockchain. Similar to Ethereum’s ERC-20, Binance Chain also has a token issuance and implementation standard code-named BEP-2. The exchange swapped the ERC-20 BNB tokens to the BEP-2 tokens on the same day the mainnet went live. All tokens that were held or stored on the platform were automatically swapped. Investors holding BNB on external wallets such as hardware or software wallets were encouraged to transfer these tokens to their Binance accounts to enable the swap or hold them in wallets that supported the swap. In September 2020, Binance launched a ‘better’ version of Binance Chain with smart contract functionality dubbed the Binance Smart Chain (BSC). The BSC is a parallel blockchain with exact comparison to the popular Ethereum blockchain. It even shares a codebase and maintains compatibility for decentralized applications (dApps) running on the Ethereum Virtual Machine (EVM). The BSC, unlike the Binance Chain, supports another token issuance and implementation standard dubbed BEP-20. However, given that both the Binance chain and BSC are proprietary properties associated with the Binance exchange, Binance wanted to create BEP-20 BNB tokens to be used as native tokens on the new blockchain. It’s worth noting that despite BNB tokens existing in various versions, the total token supply is maintained across these platforms. Any transfers between the Binance Chain and the BSC cause a redemption and subsequent burning of an equal number of tokens.
BNB Coin Burn
One unique feature that BNB has that most other major cryptocurrencies do not is its finite number of coins, all created at the time of the token sale. All 200 million BNB tokens were pre-mined. Ethereum did a similar thing during their 2014 token sale, but the difference is that with Ethereum, more coins are still getting mined (introduced into circulation) even after the token sale. We’ve mentioned before that Binance created BNB to incentivize participation in its ICO by allowing token holders to claim discounts following the platform’s launch. However, there was a big possibility that the value of BNB would fall once the discount period expired after 4 years. To counter this undesirable event, Binance adopted the concept of coin burning within their whitepaper, committing to reduce the total BNB supply by 50% or 100 million tokens. According to the whitepaper, the exchange would use 20% of quarterly profits to buy back outstanding tokens and burn them. Burning tokens simply means taking them out of circulation. So far, the exchange has undertaken 16 coin burns resulting in the removal of 31,862,964 BNB tokens from circulation. The fewer coins there are in circulation, the higher their perceived value, which will increase their demand and consequently their price.
Binance Coin Uses & Benefits
BNB may have been created as an incentive for the token sale, but since its launch in mid-2017, the token has evolved and grown to take up more roles. It has many more uses than just offering discount benefits to its holders.
Benefits
Token benefits are all the perks that holders enjoy by having the token in their possession or using it to achieve a certain outcome. Some of these benefits associated with BNB include:
Discounts – this was the original benefit recorded on the Binance whitepaper, and it was the only use for the creation of the token. Binance users can use BNB to pay for transaction fees, and if they do, they get to enjoy 25% discounts on spot and margin markets and a 10% on futures trades. There are even more discounts for higher-volume traders and those who participate in the affiliate program. Token sales – Binance conducts regular token sales on its Launchpad platform, allowing BNB token holders exclusive access to these sales. Dubbed initial exchange offerings (IEOs), Binance has been credited with heralding the concept. Staking rewards – with the launch of BSC, holders can now stake their BNB coins to help secure the blockchain. By doing this, they can earn rewards in BNB tokens, thereby increasing their holdings.
Uses of BNB
Over the past four years, BNB has found several more use cases than it was originally envisioned. Most of these have stemmed from the highly publicized Binance #BUIDL campaign encouraging Binance fans and the larger crypto community members to build innovative apps on and off the BSC. Here are some of them:
Transaction fees – you can use BNB to pay for transaction fees across all Binance platforms, including Binance exchange, Binance DEX, and paying for gas fees on the Binance Smart Chain. Spending method – Binance offers a Binance Visa Card through which its users can shop and withdraw BNB all across the world, increasing the convenience of holding your BNB tokens. Earning interest – BNB can be used in the DeFi ecosystem on apps created for the Binance Smart Chain, allowing holders to lend their tokens at an interest. It’s a great passive income opportunity similar to how a bank savings account works only with better interest rates. Make payments – Binance has partnered with several merchants to offer its users more opportunities to spend their BNB tokens, including paying for plane tickets (TravelByBit), hotel rooms (Travala), entertainment joints, online games, smartphones (HTC), etc. Invest in early-stage crypto startups – Binance allows users to invest in IEO projects on the Binance Launchpad using only BNB. Trade for profit – BNB is a great investment for both short and long-term traders. The asset has increased several-fold since its launch in 2017. It is still highly volatile, similar to other cryptocurrencies offering multiple opportunities for active traders to make a profit. Stake BNB – the Binance smart Chain uses a consensus mechanism called Proof of Staked Authority. It is an amalgamation of the Proof of Stake (PoS) and Proof of Authority (PoA) mechanisms used by other blockchains. In the PoS blockchains, network validators stake their coins to earn the right to participate in the validation process. BSC uses the same concept with network validators staking BNB to validate transactions on the BSC blockchain. Staking BNB earns the validators a reward in the form of more BNB paid by the network users. To know more about staking coin – read our in-depth cryptocurrency staking guide.
These are just some of the few ways you can make use of your BNB tokens. More uses are discovered and added regularly, and this makes BNB even more valuable.
How to Buy Binance Coin
There are several ways to buy BNB, but most of these are unofficial and sometimes risky. Not just that but methods such as using third-party brokers that accept credit and debit cards can be extremely pricey. We are not discouraging or generalizing when we say unofficial sources of BNB are bad places to get the tokens, but we encourage you to research before choosing which platform to use. Consider the cost, convenience, and security of each platform. Binance has invested in streamlining the process of buying crypto through its exchange and its partner wallet, the Trust Wallet. We recommend that if you consider getting your hands on some BNB, these two options (Binance exchange and Trust Wallet) should be at the top of your list. Here’s why:
Intuitive interfaces – both Binance exchange and Trust Wallet are easy to use, even for novice users. It’s easy to find your way around their interfaces, and they have taken the effort to partner with several third-party payment processors to enable smooth credit and debit card purchases of crypto. Security – Binance is one of the largest cryptocurrency exchanges in the world. It has suffered a major security breach before and a few service interruptions. However, it has learned from its mistakes and has taken necessary efforts to bolster its security measures to ensure the safety of customer funds, including setting up an insurance scheme. Cost and convenience – more often than not, whenever an investor buys BNB, they are considering investing in one of the several ecosystem apps that Binance supports, such as Launchpad, Launchpool, Binance Pay, etc. Buying BNB on the Binance exchange or Trust Wallet, where they may take advantage of the BNB benefits, saves the investor the time and effort of transferring funds from an external wallet or platform to Binance or Trust Wallet, in addition to being more cost-effective.
Buying BNB using Trust Wallet
This is perhaps the easiest and fastest way to lay your hands on some BNB tokens because you do not have to create an account or log in to the service as you would when using the Binance platform. If you do not currently use Trust Wallet, however, you will need to download the app and create a new wallet before you can use it.
Step 1 – Download Trust Wallet
Trust Wallet is only available currently as a mobile application on the Apple App Store and Google’s Play Store. Go ahead and download the app from your phone’s supported platform. On the App Store, here’s how it looks like: After installing, you will be prompted to either recover a previous wallet or create a new one. At this stage, you will have to back up the private keys to your wallet in the form of random words. Make sure you store these passphrases safely. If you lose them, you may never be able to access your funds.
Step 2 – Buy BNB
Now that you have successfully set up your Trust Wallet, open up the application and proceed to purchase your tokens. There are three tabs at the top of the home screen: Tokens, Finance, and Collectibles. Select the ‘Tokens’ tab. Below that, you’ll see three blue buttons. You want to click on the last one labeled ‘Buy.’ This will open up a new dialog screen to choose the asset you want to buy. In our case, we are buying BNB, so go ahead and select BNB from the dropdown list.
Step 3 – Make payment.
In the last stage, you will be required to provide the details of your order, including the number of tokens you wish to buy. Once you provide this information, click on the [Next] button at the bottom of the screen to fill in your credit or debit card details. That is it! You have just bought yourself some Binance Coins. The tokens will be deposited into your Trust Wallet account as soon as the transaction is processed.
Buying BNB on Binance Exchange
The next best way to buy BNB is to use the official Binance cryptocurrency exchange. If you are yet to sign up for an account, we recommend you start with our detailed Binance Review and our guide to Binance KYC before proceeding with this tutorial (Binance implemented a required KYC on August 20).
Step 1 – Visit Binance.com
The first step is to access the official Binance website. Hover above the ‘Buy Crypto’ button at the top navigation bar as shown above and select the option to use ‘Credit/Debit Card.’ You can also see other methods to buy BNB, including the use of SWIFT bank transfer and third-party payments such as Simplex, Banxa, or Paxos.
Step 2 – Fill in transaction details.
By clicking on the ‘Credit/Debit card’ link from the previous step, you will land on the page below on which you will provide your order or transaction details. Select the fiat currency you plan to use to buy your BNB tokens. To do that, click on the USD button and select the fiat of your choice from the dropdown list. To the left of that button is a space to fill in the amount of money you wish to spend. Below that, select the cryptocurrency you want to buy. Click on the select button and choose BNB from the dropdown menu. Binance will automatically calculate the number of tokens you will receive based on the current exchange rates and the amount of fiat you have specified. If you wish to place a recurring order whereby the Binance system regularly buys for you tokens worth the same amount at a specific time and date, you can set that up by enabling the button just below the token selection field. After you have filled out this dialog box, click ´Continue´ to proceed to the payment step.
Step 3 – Add credit card/Make payment
If this is your first time using Binance to buy crypto, you will be required to add a credit or debit card to your account. Tap on the orange ‘Add new card’ button to fill in your card details. Once you have successfully added your card, it will be listed on the payment page as a payment method, and you can select it when purchasing your BNB. You can then click on the ‘Continue’ button after selecting your payment method and make the payment. Your BNB tokens will be deposited to your Binance ‘Fiat & Spot’ wallet as soon as the transaction is processed.
Final thoughts
Binance Coin is one of the most successful utility tokens with a growing use case list. Not to mention that it has seen a meteoric rise in its value since its launch in July 2017. It’s hard not to find value in holding BNB within your portfolio. As we have discussed above, you can use it for staking, paying transaction fees and online shopping expenses, as well as paying for your flights and hotel bookings. Now that you have acquired your BNB tokens, you may be looking for a safe place to store them. Normally, we would recommend storing all your long-term digital asset investments in a hardware wallet such as Trezor or Ledger for increased safety. However, depending on how you want to use the Binance Coins, you may find that keeping them on the Binance exchange is the best option. If you have to use an external wallet, Trust Wallet is a solid alternative operated and maintained by Binance.
