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How does the BNB crypto coin work?

BNB logo on image of crypto coins
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Since Binance launched Binance Coin, the BNB crypto coin has become a key part of the world’s biggest crypto exchange’s ecosystem.

BNB began life as the asset sold during Binance’s ICO (initial coin offering), offering owners an opportunity to receive lower trading fees once the exchange launched.

Since then, the BNB crypto offering has retained an important role in the Binance operation as the business expands beyond its original concept of being a digital asset exchange.

BNB Coin history

Binance launched its ICO just over six years ago, with members of the founding team and angel investors among those to secure Binance coins.

The business raised $15 million through the sale of BNB tokens, with 100 million selling for $0.15 each.

Just over a third of the revenue was used to upgrade the Binance platform, while half was spent on branding, education, and marketing. The rest was put aside in case of emergency.

When first sold, the BNB token was built as an ERC-20 token on the Ethereum blockchain. Two years after the ICO, Binance opened its own blockchain, Binance Chain, and, with it, a native coin, BNB. A token swap in 2019 allowed BNB crypto token holders to exchange them for the coin.

How does the Binance crypto coin work?

BNB Coin operates like most other cryptocurrencies. People can buy and sell it, determining the rise and fall of its value, hold it in compatible wallets, and use it for payments.

On a more technical level, we need to look at Binance Chain, the company’s layer-1 blockchain.

The primary focus during development was optimising on-chain trading, principally to enhance Binance’s decentralised exchange. Transaction, or gas, fees on the chain are paid in the native currency, the BNB crypto coin.

Within the Binance Chain, we find the Binance beacon chain, focused on the governance of the blockchain and where BNB crypto coin holders can take part in staking and voting. There is also the Binance Smart Chain, an Ethereum Virtual Machine-compatible consensus layer with hubs to multiple chains.

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Burning BNB crypto

Binance has performed quarterly burns of BNB since shortly after its ICO in 2017. It continues to spend money four times every year to buy back and burn BNB Coin. The stated aim is to completely destroy half the original supply – 100 million BNB Coins.

As with all burn programmes, the aim is to reduce supply and drive up rarity, which can increase the value of the asset.

An unusual aspect of the Binance operation is the Pioneer Burn Program. In this, the business will evaluate cases where BNB holders have irrevocably lost their holding and, in some instances, repay them and deduct the amount of lost BNB from the next quarterly burn.

BNB and its uses

The popularity and use of Binance Coin has grown with the brand. As mentioned above, it started out as BNB crypto token to raise funds to launch an exchange and quickly gained traction.

Binance has expanded into a wider ecosystem, broadening the use and appeal of BNB crypto. The expansion has seen the launch of a decentralised exchange, two blockchains, crypto borrowing, peer-to-peer trading, and more.

BNB Coin can be used to pay for Binance Exchange transactions, with customers who use this option seeing fees reduced. As the ecosystem has expanded, BNB has become a payment component in other Binance products.

BNB can also be accepted as payment by participating merchants, used to invest in stocks, ETFs, and other assets on some platforms, as collateral for loans, and to make direct payments to others via certain apps.

BNB crypto pricing

Like all cryptocurrencies, the value of BNB fluctuates depending on market circumstances and sentiment. From an all-time low of $0.09611 in 2017, the year of the ICO, BNB rose to a heady all-time high of $690.93 in May 2021, according to CoinMarketCap.

At the time of writing, the BNB market cap was in excess of $32.5 billion.

The notable increase in BNB value between 2017 and 2021 is tied to the success of Binance Exchange, the world’s biggest crypto trading platform, and its vital role within the expanding Binance ecosystem.

Given the market dominance of Binance, some investors consider BNB a ‘safe’ investment, despite the likelihood of large short-term returns being low. However, as ever, it is vital to do your own research and be aware that BNB, like all cryptocurrencies, is subject to significant value fluctuation, and there are no guarantees, even with an established digital asset.

While Binance remains a strong brand, it has faced challenges that could impact the future value of BNB.

Regulation of Binance

In a short time, Binance established itself as one of the most significant players in the global crypto market. But problems began to emerge in 2021, when regulatory action was taken in jurisdictions including the UK, Japan, Malta, Netherlands, Cayman Islands, Malaysia, and Thailand. The UK ordered the company to cease all financial activities in the country in July of that year due to the lack of required authorisation.

Two years prior, Binance had removed US customers from its main exchange, instead launching a country-specific platform called Binance.US.

While some licences have been granted, notably in France, Binance remains under regulatory scrutiny. Just four months ago, the US Securities and Exchange Commission announced 13 securities law charges against Binance entities and founder Changpeng Zhao.

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Author: Brendan Beeken

Moni Talks Founder and Chairman Brendan Beeken is an entrepreneur, commercial strategist, investor, and philanthropist. He writes on a wide range of subjects, including cryptocurrency, decentralised finance, blockchain, business advice, and professional wellbeing, for news and business websites, as well as Latest Moni and his personal site, brendanbeeken.com. Brendan draws from his own research and more than two decades of personal experience in business to offer a unique insight, perspective, and commentary on diverse subjects. He is passionate about making the cryptocurrency space more accessible and encouraging safer and more responsible trading and investing. Brendan's LinkTree is https://linktr.ee/brendanbeeken.

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