The growth of crypto has brought with it many accompanying innovations. There are now many crypto exchanges, both centralised and decentralised. Sometimes, even these exchanges launch their own tokens, either to assist in operating the platform or to provide more rewards to their users. Binance Coin (BNB) is one such token. While it may have started as a simple ERC-20 coin, it now powers the entire BNB chain.
Binance Coin History
BNB was launched as Binance Coin back in 2017, as a part of Binance’s initial coin offering (ICO). It was distributed among the founding team, investors and interested participants. 100 million BNB tokens were available to the public during the ICO and Binance managed to raise $15 million in Bitcoin and Ethereum.
In its initial stages, Binance Coin was an ERC-20 token built on the Ethereum blockchain. It was simply a reward mechanism for those that helped bring Binance to the public. It also entitled users to lower trading fees.
All this changed when Binance launched its own blockchain in 2019. The Binance Chain is a smart contract-enabled blockchain powered by BNB, its native token. Owning it grants you access to exclusive token sales and a reduction in trading costs. It can also be used as a community token for dApps on the BNB chain.
How Does Binance Coin Work?
The BNB chain is made up of two blockchains – the BNB Beacon Chain and BNB Smart Chain.
The BNB Beacon Chain is the governance chain of the network. Tasks like staking and voting take place on the beacon chain. On the other hand, the BNB Smart Chain presents itself as an alternative to the congested and expensive Ethereum network. This is compatible with smart contracts and allows developers to create NFTs and dApps for the network.
Can you mine BNB? No, for its validation the BNB Chain uses proof of staked authority. This is a combination of proof of stake and proof of authority to enable more users to participate in securing the network. The system has 41 validators taking turns in groups of 21 to confirm blocks. Becoming a validator is not easy, however, since you need to first possess 10,000 BNB and be elected to the position.
If you do not fulfil these criteria, you can delegate your staked tokens to the validators. Both validators and delegators earn block rewards.
An essential component of the growth of this token is known as BNB burn. Binance has committed to burning 100 million tokens – or half the total supply – of BNB and removing it from circulation.
Today, the process of burning involves two factors. One, a portion of the gas fees are burned in real-time. Second, Binance has implemented a feature called auto-burn. This takes into account the number of blocks created in a quarter, the average price of BNB and a price anchor. This ensures the number of tokens burned is steady and independent of Binance’s financial performance.
What Is Binance Coin Used For?
Initially, Binance Coin was used only for lower trading fees on the Binance CEX (Centralised Exchange). Today, it has evolved to be a lot more than that. BNB can be used on the Binance CEX, DEX and for apps and games on the BNB chain.
You can also use your tokens for payments and collateral against crypto loans. Binance hosts certain ICOs available only to BNB holders. This gives you a chance to purchase new crypto before any other users on the market.
Read more: What Is Coin Burning
Finally, it can be used for governance on the BNB chain. Holders of the token can stake them to begin earning block rewards. They are also entitled to vote on key governance issues of the network.
Binance (BNB) Benefits
Integration with the Binance Platform
BNB entitles you to many benefits on the Binance platform. The first and most popular is discounted trading fees on both spot and futures transactions. Added to this are the exclusive ICOs on the exchange and BNB seems like a compelling option.
Fast and Secure
The BNB chain is capable of reaching almost 300 transactions per second. It also has much lower gas fees than Ethereum, which makes it ideal for users wishing to move away from Ethereum’s expensive and congested network.
You can easily become a staker on the BNB network. While it may be difficult to become a validator and run a node, you can delegate your staked tokens to an approved validator and share in their block rewards. This gives you an avenue to earn from owning the token.
Read more: What is Crypto Staking
BNB has come a long way since its humble beginnings in 2017. It has pushed past several barriers to emerge as one of the most popular tokens in 2022. BNB not only provides benefits for Binance users but is also a compelling Ethereum alternative. Its slew of features and deflationary measures ensure it will stay relevant for years to come.
How To Use BNB?
You can acquire BNB from crypto exchanges and transfer the tokens to your crypto wallet. Linking this wallet with any BNB chain app or game allows you to use your tokens on the platform.
Is BNB A Token Or A Coin?
In crypto, assets used only for transactions are called coins while those with smart contract features are called tokens. In this case, BNB is a token since it is smart contract compatible.
How To Mine BNB?
You cannot mine BNB as it does not run on proof of work. Instead, you can stake BNB tokens to earn more and help secure the network.