What is BNB?
Binance, the world’s biggest crypto exchange by volume, launched BNB in July 2017 as an ERC-20 token on the Ethereum blockchain. From the outset, it was intended to be the crypto token that would power the Binance ecosystem. By October 2022, it had grown to become the fourth biggest crypto in the world by market capitalization – almost US$48 billion according to CoinGecko.
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At the time of the initial coin offering (ICO) in July 2017, 1 Bitcoin got buyers 20,000 BNB, and 1 Ether secured 2,700 BNB. That means that, if you’d have purchased 1 BTC worth of BNB during the ICO (around $2,500 worth), and sold it in October 2022, when 1 BNB was trading at over $292, you’d have netted a profit of over $5.8 million!
Today there are two distinct blockchains in the BNB chain network.
- BNB Chain (formerly known as Binance Smart Chain)
Uses BEP-20 token standard and supports smart contracts. It is also compatible with Ethereum Virtual Machine (EVM), so DApps can be created using Ethereum tools.
- BNB Beacon Chain (formerly known as Binance Chain)
Developed in 2019, this uses the BEP-2 token standard. It is simpler, and more limited in terms of flexibility and scalability.
BNB Mining and Staking
Unlike most cryptos that either use a Proof of Stake (PoS) or Proof of Work (PoW) consensus mechanism, BNB uses the Proof of Staked Authority (PoSA). In essence, this combines Proof of Authority (PoA) and Delegated Proof of Stake (DPos).
This has a number of advantages, such as reducing fees and transaction times and needing only a small number of validators (21) to function. To maintain the integrity of the network, validators are re-elected daily. To even qualify for the daily election, validators must have at least 10,000 BNB staked, operate a full BSC node, and meet various other technical requirements.
Initially, the total supply of BNB was limited to 200 million, however, there are now significantly fewer, due to burning. Burning is the destruction of coins and happens both as periodic events, and due to a real-time burning mechanism. This reduction of the coin supply harnesses scarcity to ensure the price of BNB can grow sustainably – which, in turn, makes it attractive to investors and stakers, and thus ensures a healthy ecosystem.
The periodic events are known as BNB Auto-Burn and take place each quarter, while the real-time burning mechanism burns a portion of BNB spent on gas fees (transaction fees) on the BNB Chain. By mid-2022, almost 20% of the total 200 million BNB coins had been burned.
BNB Adoption & Usability
BNB is used to pay transaction fees on the BNB Beacon Chain and BNB Smart Chain, giving users various discounts at Binance, including 25% off spot trading fees and margin trading fees, and 10% off futures trading fees.
Lending and token farming are available through Binance Launchpool, exclusive token sales through Binance Launchpad, and staking opportunities for BNB via BNB Vault.
Additionally, BNB can be used with a multitude of apps that run on the BNB Smart Chain, for payments with many other platforms, and spent at over 60 million businesses worldwide via the Binance Visa Card.
BNB Coin Network Fees & Speed
Because of the unusual PoSA consensus mechanism, which requires only 21 validators, BNB transaction speeds are very fast, and gas fees are very low, costing the equivalent of just pennies.
|“When times are good, Binancians BUIDL. When times are challenging, Binancians BUIDL even more.”|
Changpeng Zhao (CZ), CEO of Binance
BNB Security and Safety
Binance is one of the biggest, most experienced and trusted crypto businesses in the world, with extensive resources and expertise. Thanks to this, BNB is being continually developed to stay ahead of threats and challenges.
However, in October 2022, the Binance Chain was hacked, resulting in a bad actor stealing around $100M worth of BNB tokens via a bridge exploit. At the time of writing, details were still sketchy, but it appears that the BNB taken were newly minted tokens, so thankfully no BNB holder suffered a loss.
Indeed, thanks to the small number of validators in its network, BNB is rather centralised compared to most cryptocurrencies. Whilst this isn’t necessarily a problem it does give the potential for manipulation – something many crypto purists won’t like.
Security and safety tips:
- Don’t leave your BNB on exchanges (unless you’re using it to pay for Binance exchange fees). Use exchanges for buying and selling only. Always transfer your crypto to a local wallet for short-term storage.
- For long-term storage, keep your crypto in a hardware wallet.
- Always keep your wallet keys in multiple safe places – they cannot be recovered.
- Never tell anyone about your crypto holdings. No matter how secure your storage is, if you or your loved ones are physically threatened, you’ll probably hand over your personal keys.
Like all cryptocurrencies (excluding stablecoins), BNB has seen significant price swings in its life. Though it remained relatively stable from launching until the start of 2021, it subsequently embarked on something of a roller coaster ride. For example, according to CoinGecko, on 10 May 2021 it hit $686.31, but by 24 May had fallen to just $261.26. During the crypto winter of 2022, the price stabilised somewhat, remaining in the $200 – $300 region for most of the year.
Final Word on BNB
Although it started out very much as a utility token to support the nascent Binance ecosystem, BNB has matured into a mainstream cryptocurrency in its own right. Today, it is a key part of the cryptosphere, and with Binance’s market share and influence still growing, its future seems very bright. All in all, BNB makes a great choice for most crypto users – especially if you trade on the Binance exchange itself.
Similar Cryptos to BNB
In terms of BNB’s use in the Binance ecosystem, it is similar to the native tokens of other exchanges – for example, the Huobi Token (HT), the utility token of the popular Huobi cryptocurrency exchange. However, the BNB BEP-20 token, which supports smart contracts, is comparable to cryptos like Ether (ETH) in many ways.