What are the benefits of investing in Binance Coin (BNB)? What are the downsides of investing in Binance Coin? Could BNB be a millionaire-maker?
If you are into cryptocurrency investing - a financial market that’s predicted to grow at a Compound Annual Growth Rate (CAGR) of 60.2% in the next four years - then there’s no doubt that Binance Coin is on your radar.
Why does Binance Coin deserve more than just a glance? Simply because Binance Coin is one of the top cryptocurrencies in terms of market cap and a popular trading asset with high liquidity!
We at Trading Education are here to help you understand the ins and outs of Binance Coin and learn more about the pros and cons of investing in BNB so you can decide for yourself if this crypto is a worthy investment.
So, let’s get started!
In this article, we will cover:
What Is Binance Coin?
Binance Coin is a popular digital asset created by Binance in 2017. Initially, Binance Coin was launched on the Ethereum blockchain but moved to its own blockchain, Binance Chain.
Being issued by one of the major crypto exchange platforms worldwide - with crypto visionary Changpeng Zhao in charge - Binance Coin had a successful Initial Coin Offering (ICO) of 100 million BNB.
Only within three weeks, Binance had raised around $15 million (used to build the platform, for branding, and also for emergency funds).
Binance Coin has a limited supply of 200 million tokens with 153,432,897.00 tokens in circulation at the time of writing.
What Is The Purpose Of Binance Coin?
One of the main goals of BNB is to support operations on the Binance exchange and facilitate a wide range of utilities, including the trading of new tokens.
Binance Coin acts essentially like a discount coupon giving traders a discount on trading fees when they trade crypto on the Binance Exchange.
The Binance exchange decided to create Binance Coin to make it easier to handle transactions, and, of course, give people an incentive to keep trading with them.
Initially, the discount was 50% and according to the Binance whitepaper, it was intended to be halved year on year. However, in 2019 Binance changed its mind and decided to keep the discount to 25% and not cut it to 12.5% as originally planned.
But there’s more to Binance Coin than this. Binance Coin is also the fuel to Binance Smart Chain, a parallel chain specifically for smart contracts, dApps and DeFi.
With immense popularity at the Binance Exchange (the largest crypto exchange by a substantial margin) and a growing DeFi market, Binance Coin is well-deserving of the 4th spot by market capitalisation.
How Does Binance Coin Work?
Binance uses the Tendermint Byzantine-Fault-Tolerant (BFT) consensus mechanism, which involves different types of nodes (validator, witness, and accelerator nodes).
Transactions are validated by 21 validators who need to stake some of their own BNB. In return, they receive BNB tokens. Validators take turns to validate blocks and must be re-elected daily.
Interestingly, Binance has a unique plan to use 20% of its profits to buy back BNB tokens and destroy them until a maximum of 50% of BNB coins are bought back.
This process is called “burning” and aims to leave only 100 million tokens in circulation to help Binance Coin maintain its value and grow gradually.
And as mentioned above, Binance Coin operates on two chains - the Binance Chain, which is the original chain for transactions, and the younger Binance Smart Chain, which can support more complex features, like smart contracts.
What Is BNB?
‘BNB’ is the ticker symbol for Binance Coin and is sometimes used specifically to refer to the coin. You will also see people using ‘BNB’ and ‘Binance Coin’ interchangeably (just like in this article).
You will see BNB written on exchanges. Typically, BNB/USD, which would mean you are using BNB to buy USD (US dollar).
And if we flip the two to USD/BNB, it will mean we are buying BNB with USD.
Just like Bitcoin, BNB has eight decimal places, which means the smallest denomination of BNB is 0.00000001, which is called a ‘Jager’.
The Pros Of Investing In Binance Coin
Given the popularity of BNB, the pros of investing in Binance Coin are worth explaining to help investors decide for themselves if BNB could be a millionaire maker.
Here are some of the most prominent advantages of buying Binance Coin.
â Binance Coin Is One Of The Best Utility Tokens:
BNB is considered one of the best utility tokens in 2021. While the token can be used to trade and pay fees on the Binance exchange, we should mention that BNB can be used beyond the Binance ecosystem.
It can also be used for payment methods across different services, including credit crypto card bills, online purchases, travel, entertainment, and transfers.
To provide an example, some apps allow users to split bills and pay friends with BNB.
â Binance Coin Uses A Unique Burndown Policy:
Burning is an essential feature of BNB to ensure its growth and stability.
Binance will use 20% of their profits to get BNB tokens and burn them to reduce the total supply until 100 million coins will be left (or 50% of the total supply).
Note that this deflationary method may lead to increased prices over time, which will also help investors make price speculations over time.
â Binance Coin Acts As A Discount Coupon:
One of the major advantages of investing in BNB is the fact that Binance users receive discounts when paying fees on the exchange.
This incentive - to provide fee reductions - is a clever way to create a growing community of supporters, and also a facilitating force for traders who perform daily operations.
A good portion of Binance’s success is probably because of BNB.
â The Binance Exchange Is Highly Popular:
BNB has reached a steady place within the best cryptos on CoinMarketCap thanks to the popularity of Binance. During the 2021 bull run, BNB was the third-largest coin until Tether pushed past.
Binance is a high growth company and the largest crypto exchange with the most cryptocurrency pairs available.
It’s no surprise that the token has gained support from different partnerships, including Uplive - one of the biggest social video entertainment platforms.
On top of that, despite some security breaches in the past, Binance also takes security very seriously - a factor that adds another layer of credibility to the token and facilitates its adoption.
Biggest cryptocurrencies in the world based on 24-hour volume, 28th June 2021. Source: statista.com
â Binance Offers Fast Transactions And Low Fees:
Binance offers fast transactions and some of the lowest transaction fees in the industry - a fee of 0.1% for all traders.
Typically, fees and speed are tied together. If a blockchain is very busy with many transactions, it normally means transaction fees will increase too.
Note that theoretically, Binance can process up to 1.4 million transactions per second. On top of that, Binance allows regular traders to win prizes (which is sure to keep people interested).
â The Binance Smart Chain Could Beat Ethereum:
The Binance Smart Chain is Binance’s secret weapon - a weapon that hid in the shadows for a while. Launched in September 2020, it didn’t get much attention till February 2021.
And coincidentally, it was at this point Ethereum transaction fees began to soar to scary heights.
YCharts captured the choppy volatility of Ethereum’s transaction fees and we can see two crazy spikes in May 2021 that would have made building DeFi applications on Ethereum impossible.
Ethereum average transaction fees, July 2020 to July 2021. Source: ycharts.com
The Binance Smart Chain benefited from this and activity on the BSC skyrocketed as projects moved over to a more stable.
Today, the BSC has the second-largest DeFi ecosystem with 37 DeFi projects, beating Bitcoin in third place with 26, according to DeFiprime.
The BSC is still far behind Ethereum’s 219 DeFi projects, but with a more stable environment, the BSC could defeat Ethereum if it cannot keep its transaction fees manageable.
All this aside, even if the BSC cannot defeat Ethereum, the DeFi market is expected to grow hugely in 2021.
According to Forbes’s Lawrence Wintermeyer, between May 2020 and May 2021, the DeFi market grew 88x.
Total value locked (USD) in DeFi. Source: defipulse.com
Cons of Investing in Binance Coin
While the advantages of BNB are evident, investing in Binance Coin can be a risky venture and comes with certain drawbacks.
Knowing the cons of investing in BNB is vital to help you decide if buying this crypto is the right move for you.
Here are some serious disadvantages of investing in BNB.
â Binance Coin Is Heavily Centralised:
Binance is a company, not a group of cypherpunks who want to liberate the world from banks. They aim to make money from the crypto market. And so, it is no surprise that BNB is heavily centralised.
BNB is centralised through the immense control Binance has over the coin. According to data collected by Etherscan, up to 80% of BNB tokens are owned by Binance in several wallets.
BNB top 100 token holders. Source: etherscan.io
This is genuinely concerning because it means they have majority control over who can and cannot be a validator on the network (validators are voted in by BNB holders).
And with that power who knows what they could do. It even opens up the possibility that they could manipulate the blockchain and conduct double-spends, for example.
â Regulators Around World Want To Take Binance Down:
For years there has been concern that eventually regulators will attempt to squash Binance, and it looks like 2021 could be that year.
Regulators are finally catching up with Binance in several countries, including the UK, Thailand, Japan, the Canadian province of Ontario, Germany, and Malta.
Thailand’s Securities and Exchange Commission filed a complaint against Binance in July 2021. They accused Binance of operating as an unlicensed digital-asset business.
A few months prior in April, Germany’s BaFin warned that Binance “risked being fined for offering its securities-tracking digital tokens without publishing an investor prospectus”, according to Reuters.
And in June Binance ran into trouble again with Japan’s Financial Services Agency for not being regulated to operate in Japan.
Though CEO Changpeng Zhao (‘CZ’) said they were in ‘constructive dialogues’, this is not the first time Binance and Japan have locked horns. (It should also be noted that Binance was based in Japan for a period.)
Then in the same month, Binance pulled out of Ontario, Canada, after several crypto exchanges were accused of not complying with the Ontario Securities Commission.
And way before all this, in February 2020, the Malta Financial Services Authority declared in a public statement that Binance is not authorised to operate in the ‘crypto currency sphere’. And to do so, they would need a licence.
This could be a big blow to Binance as Malta is seen as their de facto headquarters, and they will likely need to relocate once more.
But the biggest and most concerning news came more recently when the UK completely banned Binance.
The UK Financial Conduct Authority stated that Binance was not regulated in the UK and that it must cease advertising and display a notice that it is not permitted to operate in the UK.
There are worries that this could start a trend of major economies implementing a full ban of the exchange.
â Binance Is A Major Target For Cyber Attacks:
Binance is a tempting target for cyber attackers. In March 2018, one unsuccessful attempt was made to overwhelm and hack the system, which led to Binance’s hacker bounty program.
Binance offered $250,000 for information about the hackers. Sadly, in May 2019 another attack happened and led to the loss of around 7,000 BTC (the equivalent of $40 million at the time).
Though the team behind Binance takes security seriously, some investors may be put off by possible risks.
â Binance Is Operating A CeFi Exchange In A DeFi World:
As decentralised lending and trading protocols continue to grow, Binance’s position is starting to look precarious.
In an interview with CoinDesk’s Muyao Shen, CZ did agree that decentralisation is the way forward and acknowledges that Binance may lose its place as DEXs (decentralised exchanges), such as Uniswap, continue to grow.
And if that does indeed happen (it will probably take a few years to get to that point), BNB might not have much use left.
As a centralised exchange (CeFi), that charges traders for its services, what can it offer traders that DEXs don’t?
â Heavy Competition With Other Smart Contract Cryptos:
While the Binance Smart Chain may be stealing a little of Ethereum’s thunder, Ethereum 2.0 which will use proof-of-stake, could be a major threat to BNB’s success.
Not only is it bound to get a lot of attention from enthusiasts, devs and traders, but it may also knock the BSC back in its place.
With a huge DeFi ecosystem, interoperability to many of the top cryptos and an army of devs, Ethereum might just blow everyone’s minds.
And it’s not just Ethereum to worry about, there’s also Cardano which is dangerously close to launching its smart contracts, which are widely believed to be the most advanced we have seen so far.
Should I Invest In Binance Coin?
Now it’s up to you to decide if its advantages outweigh possible risks and if BNB can be potentially a profitable asset for your portfolio.
Being the native cryptocurrency of one of the largest crypto exchanges, there’s no doubt that Binance Coin has numerous advantages and is worth investing in.
They have the financial backing and expertise that could really boost BNB’s reach throughout the crypto market.
On top of that, Binance offers different trading apps, discounts, and prizes. And staking BNB is also proving to be very profitable for some too.
At the same time, it’s important to note that buying and selling Binance Coin comes with certain risks, including the risk of loss of capital.
Just because you can invest in BNB easily, that doesn’t mean you necessarily should - it might not be the best investment for you.
Concerns over centralisation stand out as the biggest red flag, and with attacks from both hackers and financial regulators, Binance has a big target on its back.
If you are willing to invest the time and energy to do your research and analyse the reward-risk potential of BNB, then investing in BNB could work for you.
How Much To Invest In Binance Coin?
If you decide to add BNB to your portfolio, then remember that its current price is a low barrier of entry for crypto beginners and an alluring feature for established investors.
The good news is that one can start trading cryptocurrency with as little as $100.
Just don’t forget to invest only money you can afford to lose. And as experts suggest, never invest more than 1% of your funds on a single trade!
The 1% rule dictates that you should only invest 1% of your funds for trading on any position. It is a common rule practised by many traders and it can drastically reduce your risk.
It’s simple. If you have $100, only ever invest $1 on each trade - not the whole $100! By trading smaller amounts, you have more chances to make a profit.
You can also look into hedging against BNB if things don’t look too good and investing in stocks and forex if the crypto market isn’t in good shape.
Will Binance Coin be a Millionaire Maker?
With a market cap of $47,460,477,248, Binance Coin has definitely already made some millionaires, and with its current volatility, it will probably make a few more.
Besides, having a limited supply of tokens (200 million coins), the value of BNB is likely to increase further, as scarcity tends to promote growth in crypto prices.
To provide an example, at the start of 2019, BNB increased from $6 to $38 in a few months, while at the start of 2020, BNB increased from $15 to $25, which is an increase of about 66%.
But the most important thing to consider is if BNB will continue to increase adoption, and one major way it could do that is with the Binance Visa card.
The Binance Visa Card converts BNB holders coins into fiat currency when making a transaction. This practically makes BNB usable anywhere and could seriously drive-up adoption.
Where Can I Buy Binance Coin?
eToro - Buy Binance coin BNB
eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
How To Buy Binance Coin?
You can buy Binance Coin in four simple steps with eToro.
Step 1. Sign up to eToro. Go to eToro’s website → click ‘Join Now’ → complete the registration form.
Step 2. KYC. To mitigate fraud and comply with anti-money laundering laws, you will need to provide proof of identity and address.
Step 3. Make a deposit so you can buy your BNB. The minimum deposit is typically $200 ($50 in the USA), but several countries are much higher.
Step 4. Buy BNB. Go to ‘Trade Markets’ → ‘Crypto’ → ‘BNB’. You can then choose how you buy your BNB.
And now you have Binance Coin!
If you remember anything from Pros And Cons Of Investing In Binance Coin, Will It Be A Millionaire Maker, make it these key points.
- Binance Coin was created by Binance in 2017, the largest crypto exchange in the world, and is headed by CEO CZ.
- ‘BNB’ is the ticker symbol of Binance Coin.
- Initially launched on the Ethereum blockchain, Binance Coin moved to its own blockchain, the Binance Chain and the Binance Smart Chain.
- Binance Coin uses the Tendermint Byzantine-Fault-Tolerant (BFT) consensus mechanism.
- BNB also has a unique burndown policy and acts as a discount coupon, which are some of the biggest benefits of investing in Binance Coin.
- Binance is often the target of cyber attacks and is currently experiencing regulatory difficulties in several countries.
- With its impressive market cap of over $47,460,477,248, Binance Coin is already a millionaire-maker, and some experts predict that BNB will reach new highs in the future.
If you enjoyed reading our article Pros And Cons Of Investing In Binance Coin, Will Binance Coin Be A Millionaire Maker, then please share it with anyone who might be interested in cryptocurrency trading, too.
Still have questions about Binance Coin? Maybe these frequently asked questions will help?
Why Has Binance Been Banned In The UK?
Binance’s UK entity, Binance Markets Limited, has been banned in the UK because it is not permitted to conduct any ‘regulated activity’ in the UK.
The UK’s Financial Conduct Authority stated the following:
“Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA”.
Why Is Binance Banned In The US?
Binance is not banned in the US, US traders can use Binance through its US entity Binance.US.
But do note that the trading conditions are not the same and there are considerably fewer cryptocurrencies available to trade.
This is not too surprising as US regulations are typically very strict, and it can be very difficult for foreign entities to get regulated. To do so they often need to make changes to the services they provide.
Can Binance Be Trusted?
In most cases, Binance is a trusted exchange and Binance Coin is a trusted cryptocurrency. Binance takes its image seriously and attempts to provide an honest service.
However, there are of course several issues that make it difficult to trust Binance 100%.
Regulators certainly do not seem to trust Binance with 2021 looking like it could be a grim year.
In October 2020, leaked documents showed that Binance had deliberately masterminded a corporate structure to deceive regulators and at the same time profit from US investors.
This makes us question Binance’s trustworthiness even further.
Can Binance Be Hacked?
Yes, Binance can be hacked, and it has been hacked multiple times already. Because of this, you should not leave any tokens available on the exchange - always withdraw them and put them in your wallet where they will be safer.
How To Mine Binance Coin?
According to Coinario, Binance Coin can be mined on home computers and even on Android phones, but the best way to mine BNB is with an ASIC.
They also explain that the best way to get started is by joining a mining pool and mining with your home computer. As you get more experienced, you can consider investing in an ASIC.
How Big Could Binance Coin Get?
BNB could reach $12,903.46 by December 2030 according to Cryptocurrency Price Prediction. This is BNB’s highest prediction so far, but it is also pretty far away and should not be taken as fact.
What Was The Cost Of Binance Coin When Launched?
$0.10 was the cost of Binance Coin when it launched its ICO on the 1st of July 2017, according to ICORating.
But this is not BNB’s all-time low. BNB’s lowest point was $0.09611, a month later on the 1st of August 2017.
What Is The Binance Smart Chain?
The Binance Smart Chain is Binance Coin’s second blockchain that is specifically for smart contracts, dApps, DeFi projects and tokenised assets.
What Coins Are On Binance Smart Chain?
According to BscScan, there are 817,765 token contracts on the Binance Smart Chain and many of them are ‘pegs’ whose value is attached to another crypto.
Token contracts allow the creation of new tokens on the Binance Smart Chain, just like on the Ethereum platform. These tokens are called BEP 20 tokens.
Here are the top 10 BEP 20 coins on the Binance Smart Chain by market cap:
- Binance-Peg Ethereum Token (ETH)
- Binance-Peg BSC-USD (BSC-USD)
- Wrapped BNB (WBNB)
- Binance-Peg Cardano Token (ADA)
- Binance-Peg Dogecoin (DOGE)
- Binance-Peg XRP Token (XRP)
- Binance-Peg USD Coin (USDC)
- Binance-Peg Polkadot Token (DOT)
- Binance-Peg Uniswap (UNI)
- Binance-Peg BUSD Token (BUSD)
Is Binance Smart Chain Better Than Ethereum?
The Binance Smart Chain is certainly cheaper to use than Ethereum. This is because the Binance Smart Chain uses a more advanced consensus algorithm while Ethereum is still transitioning from proof-of-work.
The Binance Smart Chain also benefits from being a lot less congested too, which can contribute to longer waiting times and higher transaction fees.
However, Ethereum can be said to be a lot more trustworthy as it is far more decentralised than BNB.
What Can I Do With Binance Smart Chain?
According to Binance Coin Docs, you can transact BNB and other tokens, explore transaction history and other interfaces, and stake BNB to earn rewards.
And developers can also create new tokens, migrate dApps, run a full node, become a validator, and even develop new wallets.
How Fast Is The Binance Smart Chain?
Supposedly the Binance Smart Chain can complete 57.8 transactions per second with a three-second completion time, according to YIELD app. This is significantly faster than Ethereum’s 15 transactions per second.
However, do bear in mind that Ethereum has a much larger community than Binance Coin which can slow down the network.