Binance Coin (BNB) is a token developed by Binance, the largest cryptocurrency exchange in the world by trade volume. The token aims at reducing the cost of transactions on the platform provided the BNB token is used. BNB is an ERC-20 token created on the Ethereum blockchain, but plans are underway to transfer BNB to its own mainnet. This guide to Binance Coin will go through the fundamentals of the project as it works to achiev its goals.
Functions Of BNB On The Binance Platform
Binance Coin is meant to facilitate utilities on the exchange and drive operations at a cheaper cost, at least for now. Some of the functions BNB is trusted for on the platform include paying of transaction fees, exchange fees, and listing fees.
To draw people to use the BNB token, Binance introduced a 50 percent discount when using the token. However, the discount will continue decreasing each year for four years.
According to the token’s white paper, the discount will be 50 percent during the first year, 25 percent during the second year, 12.5 percent during the third year and 6.25 percent. The fifth year will see Binance end the discounts when using the BNB token on the exchange. The trading fees on the platform currently stand at 0.1 percent.
Apart from paying fees on the exchange, it can also be used to purchase specific ICO tokens listed on the platform.
BNB Coin History
The history of BNB is intertwined with the history of Binance. In mid last year, the exchange issued an Initial Coin Offering.
The ICO ran from July 14th to July 27th, 2017 and the proceeds were used to launch the Binance cryptocurrency exchange and the BNB token. 100 million BNB’s were sold during the ICO period raising $15 million.
The exchange was initially headquartered in China but shifted its main offices to Malta after the Chinese government imposed a ban on all cryptocurrency activities in the country.
The platform is headed by Changpeng Zhao who is also its founder. Others include Roger Wang (CTO), James Hofbauer (Chief Architect), and Paul Jankunas (VP of Engineering).
It is worth mentioning that a few months ago, the team behind Binance decided to burn their token allocation, equal to 40% of the total coins issued by the exchange. In this way, they will not have to be dependent on the price of BNB to continue doing their job.
The Reducing BNB Supply
Binance has outlined that it needs to reduce the amount of BNB in circulation to only 100 million which is 50 percent of the total BNB token supply. These will be achieved by burning or buying back BNB tokens on a quarterly basis. In every quarter, the amount of BNB tokens being bought back will be worth 20 percent of the exchange’s quarterly profits.
By purchasing its own tokens, Binance wants to reduce the supply to try and trigger a demand which may have a positive effect on the BNB price.
The BNB token can also be exchanged for other small coin balances referred by the exchange as ‘crypto dust.’ Crypto dust from several coins on the platform can be converted to BNB token.
On July 12, Changpeng Zhao announced that they will be giving up all their BNB allocations and contribute them towards their commitment to burning a total of 100 million BNB tokens. The team behind Binance decided to burn their tokens with the last quarterly burn in which 808,888 BNB tokens were burned.
As Mr. Zhao explained, the team at Binance held 40% of the total BNB supply, which was allocated to them as a reward to the work they did building the crypto trading platform and blockchain ecosystem. In this way, they will still burn the BNB based on trading volume on Binance each quarter but the team has given up their token allocation.
The goal is to reach a total BNB supply of 100,000,000 coins when there is currently a supply of almost 189,000,000 BNB.
Changpeng Zhao wrote in a blog post released in July:
“The team will burn off the 80,000,000 BNB team allocation first, and the remaining 9,000,000 BNB will be burned by Binance.com exchange.”
In this way, Binance is going to be allocating 0 BNB to themselves from the original supply. All the funds the company will gather will come from the services that they are currently offering.
Future Plans For The Binance Coin (BNB)
Binance has plans to migrate the coin from the Ethereum platform together with making the exchange decentralized on the Binance Chain where BNB will be the native token. Binance is also seeking to shift from being company managed to be community managed.
To increase the demand for the BNB token, Binance has embarked on several projects which include the Binance Launchpad which specializes in ICOs and allows BNB to be used. There is also the Binance Blockchain Charity Foundation which gives donations in the form of BNB tokens.
Binance was already able to launch its own blockchain network and decentralized exchange. The Binance Chain allows projects to release their coins on top of it, and the Binance decentralized exchange (DEX) helps users transact digital assets without depending on the main Binance platform.
The Binance Chain was launched on April 23 and it uses the BNB token as the main digital asset of the network. The consensus mechanism implemented by this blockchain network is known as Delegated Byzantine Fault Tolerance (dBFT).
Moreover, the exchange launched its decentralized exchange in order for users to have more control over their funds. Centralized exchanges tend to have weak points that are exploited by hackers. The exchange lost 7,000 BTC due to a hacker that was able to have access to Binance’s funds. However, the platform used its SAFU fund in order to re-pay users the money they lost. 17
Being an ERC-20 token, BNB can be stored in software wallets such as MyEtherWallet and Jaxx, while hardware wallets like TREZOR and Ledger Nano S also support BNB. Generally, any wallet capable of storing Ethereum (ETH) can also support the BNB token.
However, as the token migrates to its own blockchain, the team will be required to develop a compatible wallet.
Read beyond this guide to Binance Coin by checking out the BNB Price Prediction and Technical Analysis article. Interested readers should also check out our coverage of Binance Coin in articles exploring its ‘gas’ use for Binance’s decentralized exchange, or how BNB price rose in relation to the exchange’s expansion.