Advantages and Disadvantages of Investing in BNB
What are the benefits of Binance Coin (BNB) investment? What are the downsides of Binance Coin investment? Does BNB have the potential to become a millionaire maker?
Learn more about the pros and cons of investing in Binance Coin pushing you ahead to know if it is a good idea to invest in Binance Coin BNB.
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 a second 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!
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 being in charge - Binance Coin had a successful Initial Coin Offering (ICO) of 100 million BNB.
Only within three weeks, Binance raised around $15 million (used to build the platform, for branding, and also for emergency funds).
Binance Coin, trading with the BNB symbol, has a limited supply of 200 million tokens.
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 in order to help Binance Coin maintain its value and grow gradually.
In terms of technicalities, Binance uses the Tendermint Byzantine-Fault-Tolerant (BFT) consensus mechanism, which involves different types of nodes (validator, witness, and accelerator nodes).
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.
The great news is that BNB acts like a discount coupon as well. Traders will receive discounts on trading fees, with discount percentages being reduced by half each year. Note that in 2017, the discount was 50%.
But what other advantages does BNB offer?
The Pros Of Investing In Binance Coin
Given the popularity of BNB, the pros of investing in Binance Coin are worth explaining in order 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:
✅ 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 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.
✅ Binance Coin uses a unique burndown policy:
As explained above, 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.
✅ 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.
✅ Binance is highly popular:
BNB has reached a steady place within the best cryptos on Coin Market Cap thanks to the popularity of Binance. Binance is a high growth company and one of the largest crypto exchanges globally. 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.
✅ Binance offers fast transactions and low fees:
Binance offers fast transactions and one of the lowest fees in the industry, a fee of 0.1% for all traders. Note that Binance can process up to 1.4 million transactions per second. On top of that, Binance allows regular traders to win prizes.
Cons of Investing in Binance Coin
While the advantages of BNB are evident, investing 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:
❌ Discounts continue to decrease:
Though Binance offers discounts to traders who make transactions with Binance Coin on the exchange, discounts continue to decrease, which can be off-putting. According to their whitepaper, in the 4th year, the discount will be reduced further to 6.75% - which supposedly will happen in 2021.
❌ Regulations may affect BNB holding and trading:
The regulatory red-eye in Binance’s home country - China - is only one of the problems that may affect the token in the long-term. The relationship with Binance US is also complicated and may harm US passport holders, with more than 15% of the website’s traffic being previously from the US. Here we should note that Binance has opened a dedicated US exchange to deal with issues around its legality.
❌ Binance has just recently allowed fiat deposits and withdrawals:
Unlike other platforms that accept traditional payment methods, including bank transfers and PayPal, Binance didn’t use to accept fiat deposits or withdrawals. This usually makes it impossible for beginners to start trading cryptos.
❌ BNB is limited to the Binance exchange:
BNB is highly dependent on the Binance exchange’s reputation, which can prevent it from taking flight on its own. On top of that, some users have shared mixed reviews about the customer support services provided by Binance (sometimes marked by long delays and no phone support).
❌ Binance is one of the main targets of 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 $40 million. Though the team behind Binance takes security seriously, some investors may be put off by possible risks.
❌ Binance Chain doesn’t support smart contracts:
As stated earlier, BNB was launched on the Ethereum blockchain but later moved to its own blockchain. Yet, this is one of the cons of investing in BNB - simply because, unlike Ethereum, Binance Chain doesn’t support smart contracts. And as we know, smart contracts and decentralised applications have massive potential benefits for businesses and investors.
Should I Invest In Binance Coin?
Now when you know the pros and cons of investing in Binance Coin, 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. On top of that, Binance offers different trading apps, discounts, and prizes.
At the same time, it’s important to note that buying and selling Binance Coin come with certain risks, including the risk of loss of capital. Just because you can invest in BNB easily, that doesn’t mean you should.
If you are willing to invest the time and energy to do your research and analyse the reward-risk potential of BNB, however, then investing in BNB could work for you, too.
How Much To Invest In Binance Coin?
If you think that the pros of Binance Coin exceed its cons, then you may also ask “How much to invest in BNB?”
Well, 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!
Will Binance Coin be a Millionaire Maker?
With a market cap of $5,676,540,952 at the time of writing, Binance Coin in a sense is already a millionaire maker.
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%.
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Pros And Cons Of Investing In Binance Coin - Key Points
- Binance Coin was created by Binance in 2017.
- Binance - with crypto legend Changpeng Zhao in charge - is one of the largest crypto exchanges globally.
- BNB is the ticker symbol of Binance Coin.
- Initially launched on the Ethereum blockchain, Binance Coin moved to its own blockchain, Binance 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, however, is a target of cyber attacks and may experience regulatory difficulties (particularly in the US), which are some of the serious drawbacks of investing in BNB.
- With its impressive market cap of over $5 billion, Binance Coin is in a way already a millionaire maker, and some experts predict that BNB will reach new highs in the future.
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