What is the purpose of the Binance Coin?

Last Updated July 23rd 2021
6 Min Read
    • Binance Coin is the fourth-largest crypto and trades at $346.61 per coin at the time of writing.
    • Binance Coin acts as a discount token at the Binance Exchange and fuel for the Binance Smart Chain for DeFi projects.

Binance Coin was created by the Binance Exchange, the world’s largest cryptocurrency exchange. It uses the ticker symbol ‘BNB’.

BNB was introduced to make paying for transactions easier on the Binance Exchange and likely played a major role in their success.

Today, the Binance Exchange gets 38,475,284 weekly visits, has a 24-hour trade volume of $29,748,645,772, and offers over 367 coins, according to data from CoinMarketCap.

Binance is also headed by CEO Changpeng Zhao, otherwise known as CZ, who is highly influential in the crypto market.

Since its inception, Binance Coin has evolved to encompass a much wider range of use cases, some of which we will look at in more detail.

What Is Binance Coin Used For?

Binance Coin is primarily used for two things - a discount token on the Binance Exchange and as fuel for the Binance Smart Chain’s DeFi ecosystem.

At the Binance Exchange, traders can get a discount on transaction fees when they pay in Binance Coin. Since 2019, the discount has remained at 25%.

The Binance Smart Chain is a smart contract chain that runs parallel to the Binance Chain. It enables sophisticated DeFi applications to be built on top.

More recently, staking Binance Coin has become very popular too. Using BNB Vault, BNB holders can stake their BNB tokens to be loaned out to others and earn interest on their tokens.

BNB can also be used to purchase products and services including flights, NFTs and hotels among other things, according to Trust Wallet.

On top of that, you can also use BNB to make purchases using the Binance Card. The Binance Card is a Visa debit card that converts your BTC, BNB, SXP and BUSD into fiat when you make a transaction.

As Binance continues to expand its many applications we may see more use cases for Binance Coin. This could potentially increase demand for the coin.

Is Binance Coin Proof Of Work?

Binance Coin has different consensus mechanisms for its two different chains. The Binance Chain uses Byzantine Fault Tolerance (BFT) consensus algorithm, but the Binance Smart Chain uses proof of staked authority, a variation of proof of stake. Neither chain uses proof of work.

The Binance Chain’s BFT algorithm relies on ‘validators’ who verify blocks and receive tokens in return.

Meanwhile, the Binance Smart Chain’s proof of staked authority allows BNB to be staked to vote on governance protocols and to participate in network security.

Theoretically, this all makes Binance Coin more energy-efficient than proof of work cryptocurrencies, like Bitcoin.

However, we will only ever know this if Binance Coin reaches the same capacity as Bitcoin.

What Does BNB/USD Mean?

BNB/USD is a trading pair. When BNB is in the front, it means you are selling BNB for the following currency or crypto, in this case, the US dollar (USD).

If we reversed the two - USD/BNB - it would mean we are trading the US dollar for BNB. In other words, you would be buying Binance Coin with the US dollar.

What Price Did Binance Coin Start?

Binance Coin was worth approximately $0.15 per BNB token during Binance’s 2017 ICO, or 1 ETH for 2,700 BNB or 1 BTC for 20,000, according to Binance.

Four years later, Binance Coin reached its all-time high of $690.93 on the 10th of May 2021. But it has since fallen to $346.61 at the time of writing.

Despite this, according to CoinMarketCap, BNB has still managed to generate a return on investment (ROI) of 299,950.85%.

Read Also: What Will Binance Coin Be Worth In 2025?

Why Is Binance Coin So High?

Binance Coin is so high right now because the Binance Smart Chain is very popular for DeFi projects. At the time of writing, BNB is the fourth-largest coin by market capitalisation.

Though launched in September 2020, the BSC didn’t gain much use until Ethereum transaction fees started to peak in February 2021.

This happened because the Ethereum network became too congested and was unable to handle the traffic. The more transactions waiting to be validated, the more expensive fees became.

It led many DeFi projects to jump ship and join the BSC instead where it was much cheaper.

And the DeFi market is only expected to get bigger. According to CoinDesk, the DeFi market grew by approximately 150% during the first quarter of 2021.

Today, the BSC is the second-largest chain for DeFi projects after Ethereum, according to DeFiprime.

How Do I Sell My Binance Coins?

You can sell your Binance Coins at a cryptocurrency exchange or a broker. Ideally, they should offer to trade Binance Coin for your chosen fiat currency.

To do this, you will have to move your crypto to your exchange or broker from your digital wallet. (You will first need to set up an account with them, of course.)

There may be multiple ways in which you can sell your Binance Coins. For example, you may have the option to sell them immediately or you might be able to choose to sell at a certain price. It all depends on the service you use.

Once finished, you will receive either fiat currency (or crypto) deposited into your account, and you will be able to withdraw it.

Do note that depending on the service you use, you may have to pay a fee to your broker or exchange for the trade. Whatever you do, make sure the service is trustworthy!

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Key Points

      • The primary purpose of Binance Coin is as a discount token at the Binance Exchange and as fuel for the Binance Smart Chain.
      • BNB works on two blockchains, the Binance Chain and the Binance Smart Chain. Neither chain uses proof of work.
      • BNB/USD is a crypto to fiat pair. It means you can trade BNB for the US dollar.
      • Binance Coin started at $0.15 in 2017 and in 2021 reached $690.93. It currently trades at $346.61.
      • In 2021, Binance Coin gained immense popularity when DeFi projects jumped over from the Ethereum network to the BSC.
      • The BSC is now the second-largest DeFi platform after Ethereum.
      • You can sell BNB at an exchange or broker. Ideally, it should offer your desired fiat currency.

Read More:

26 Reasons Why You Should Invest in Binance Coin Today

What Will Binance Coin Be Worth In 10 Years?

Will Binance Coin Make Me Rich?

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