What is BNB and is it a good investment these days? BNB, which is also known as Binance Coin, is a utility token that was created by Finance which is said to be the largest crypto exchange in the context of the trading volume. It strengthens the BNB Chain which is preferably known as a smart contract blockchain network established by Binance which is the origin of several projects. Besides, it provides various roles on the Binance exchange.
In the meanwhile, the investors who bought at the beginning of 2021 got returns of over 1,200 percent by the end of the year. In this blog, we’ll discuss what BNB is and find out if it’s a good investment these days considering there are a lot of Bitcoins available in the market. The digital industry has a lot of competition and hence, if you won’t be the best, then you’ll be the rest.
Why is BNB unique?
One of the major aspects of BNB is that it’s the official cryptocurrency of the Binance and US exchanges. This is what makes it unique among all. Besides, it is also the native token of Binance’s BNB Chain which is a set of two parallel blockchains — BNB Beacon Chain and BNB Smart Chain. Notably, the BNB Beacon Chain is formerly known as Binance Beacon Chain while BNB Smart Chain is formerly known as Binance Smart Chain. Both of them have different purposes.
Being a utility token, the BNB is having quite a few uses, however, there are a few who don’t get on board. Some of these include:
– Getting discounts on trading fees on Binance while paying in BNB. The discount includes 25 percent on spot trading and margin trading while it is 10 percent on futures trading.
– If you hold the BNB, you get access to the new token sales on the Binance Launch Pad.
– BNB is used to pay the transaction charges on the BNB Chain.
– BNB is brought to use as the community utility token on the BNB Chain ecosystem for the use cases that include several games and decentralized applications.
– The role of BNB on the BNB Smart Chain has been essential for its growth. Notably, the BNB Smart Chain is said to be a programmable blockchain that can process smart contracts. This means the developers may use it in several ways. These include creating decentralized apps (dApps), selling non-fungible tokens (NFTs), and establishing blockchain games.
Back in 2021, Ethereum was suffering from huge network congestion that resulted in slow transactions and expensive transaction fees. It is pertinent to mention that Ethereum is the largest smart contract blockchain.
The transaction fees on the BNB Smart Chain were very cheap while the process was too quick. While the Ethereum network has been one of the most prominent networks, there have been several developers and users who switched to Ethereum so that they have to pay less in fees. This led to the rise in demand for the BNB ever since it was needed to establish something on and using the BNB Smart Chain.
Where did BNB come from?
The team which has been developing Binance launched the BNB through an initial coin offering (ICO) that was processed from June 26 to July 3, 2017. The initial supply was 200 million BNB tokens with a value of over $0.11 each. Back then, as many as 100 million were sold in a public auction, over 20 million were distributed to the investors, while 80 million of them were given to the founding team.
As per the report, the ICO raised over $15 million in Bitcoin and Ethereum. It provided 35 percent for upgrading Binance’s platform and exchange, 50 percent for marketing, and reserved the remaining 15 percent. Later, the Binance exchange was launched on July 14, 2017.
Initially, the BNB was an ERC-20 token that was based on Ethereum. In April 2019, Binance came up with its blockchain, named Binance Chain which is now known as the BNB Beacon Chain. It has its own BNB as the native token and those with the ERC-20 BNB tokens were allowed to swap them for the new BNB tokens with a ratio of 1:1.
How does the BNB work?
It is worth mentioning here that BNB is considered fuel for the BNB Chain and there are two different types of blockchains in the BNB Chain.
– BNB Beacon Chain, which was earlier known as Binance Chain, was used to handle the governance of the BNB Chain. These included staking and voting on the offers.
– BNB Smart Chain, which was earlier known as Binance Smart Chain, is said to be a smart contract platform. It is notably compatible with the Ethereum network.
Thus, the BNB Chain uses a unique mechanism that is used to validate the transactions and also govern its network. The unique consensus mechanism used by the BNB Chain is known as the proof of staked authority. With this mechanism, the aspects of the prominent proof-of-stake system are combined with the proof-of-authority system.
It may be recalled that the BNB Chain’s system includes 41 validators, while the 21 take a turn while confirming the blocks of transactions. In order to become a validator, the users would have to initially stake at least 10,000 BNB tokens so that the individual can become an elected candidate.
In the meanwhile, the other BNB users were enabled to become delegators and stake their tokens in the back of an elected candidate. It is noteworthy that the BNB Chain selects 21 elected candidates on the regular basis and makes them validators who can vote in the governance decisions on the behalf of their delegators.
With this, the validators and their delegators are given block rewards for each block of transactions that are validated by them. The rewards are given from the BNB Chain’s transaction fees.
What are the connections of BNB?
The BNB Chain ecosystem has been assisting over 1,200 projects and it is preferred by the decentralized finance (DeFi) platforms providing alternate ideas to traditional financial services. Let’s have a look at some of the major projects established on the BNB Chain:
– PancakeSwap, which is a decentralized crypto exchange
– Venus, which is a lending protocol
– Alpaca Finance, which is a yield-farming protocol to earn the crypto rewards
– CoinWind, which is a digital asset bank
– MOBOX, which is a platform with NFTs
Is BNB a good investment these days?
Indeed, the BNB is said to be a high-risk and a high-reward investment. The value of investors depends on how much they know about the Binance exchange and the BNB Chain. Although BNB is said to be one of the largest cryptocurrencies, it has a lot of potential to grow. The Binance exchange has caught a huge section of the crypto market. Likewise, the BNB Chain ecosystem has been a huge platform. However, both of them are competitive advantages for the BNB.
Indeed, there has been the possibility of Binance and the BNB Chain losing their market share and hence, there have been more quality crypto exchanges than ever/ BNB Chain has been facing a similar problem ever since there have been a few smart contract blockchains that turned out to be its competition.
If you’re fond of Binance, then it is pertinent to mention that it is worth investing in BNB. This way, you will be enabled to stake in an order to earn passive income, and have discounts on the trading fees, besides having an access to the sale of tokens through the Binance Launch Pad.