Since its conception, the BNB coin has gone through quite a journey, and its initial holders came along for the ride. After several iterations and expanding applicability, it now stands as one of the most popular coins in the industry. But what is BNB actually used for?
Well, that's exactly what I'll cover in this article, alongside its history and many more things. Spoiler alert: upon its initial release, the BNB coin was priced at $0.11, whereas, as of writing, BNB commands a value hundreds of times greater than that.
If this piqued your interest and you’re considering experiencing the BNB benefits for yourself, you can always head to Binance and purchase the asset with fiat or trade it for other crypto assets.
Key Takeaways
- BNB is a versatile utility token that is used for various purposes within the Binance ecosystem, from paying fees to accessing decentralized applications and governance features;
- BNB offers trading benefits such as discounted fees and VIP program eligibility on the Binance exchange, incentivizing users to engage actively in trading and holding the asset;
- BNB serves as a gateway to innovation, enabling access to token sales and supporting the development DeFi applications, driving the evolution of blockchain technology.
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Table of Contents
What is BNB?
Many who engage in the crypto world seek greater control over their financial freedom. However, due to their general novelty, cryptocurrencies are still trying to find their footing among the masses, which is why such questions as "What is BNB?" arise.
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According to a study, the value of a cryptocurrency depends on the number of holders it has since, without public trust, the whole system that supports virtual currency can fall apart[1]. One of the best ways to ensure such public trust is to present a coin or token that can be used in versatile ways without too much of a hassle. That’s where BNB comes in.
So, what is BNB? Simply put, it’s a cryptocurrency issued by the Binance exchange. Originally it was called the “Binance Coin”, and some people still refer to it as such. However, after going through several iterations, it was rebranded to BNB. The acronym stands for “Build And Build”, highlighting the core ideas its creators attached to the token.
BNB is a coin that powers the BNB Chain ecosystem. You can buy, sell and trade BNB like any other crypto asset, but you can also use it in a wide range of additional ways.
It's worth noting that BNB was released in 2017 as a token, but it has since grown into a well-established coin with its own unique features (no, a token and a coin are not the same thing). It was launched during an Initial Coin Offering (ICO) as a way to raise capital for Binance.
As a token, BNB was initially launched on the Ethereum network based on the ERC-20 token standard. However, once Binance launched its own blockchain, BNB became the native coin of the BNB Chain. Hence, as of writing, there are three versions of the asset, which I'll discuss later.
As a cherry on top, BNB might also be seen as an investment in a broader sense, too. Binance is committed to furthering the reach and capability of decentralized networks, and you can probably guess what holds a special spot when it comes to transactions and innovations of Binance-related networks and platforms.
When it comes to the topic of what is BNB crypto, there’s a general rule the users should be aware of – like many crypto assets, BNB is a finite resource. From the very beginning, an auto-burn mechanism was implemented into BNB, which would periodically regulate its supply. However, this is not a restriction - it’s more like asset control, as it regulates BNB, and acts as yet another factor in determining its long-term value.
In short, BNB is a crypto coin native to the BNB Chain, and it offers plenty of benefits when utilized within the ‘home network’. However, it has undergone several improvements, and its use cases have increased considerably. With Binance forging ahead with a DEX (more on it later), the future of BNB sure looks promising.
Binance Coin Conception and History
You can't fully understand what is Binance coin without delving deeper into the journey of this crypto asset.
In 2017, an ICO was launched in hopes of securing enough capital to kickstart Binance. In total, 200 million tokens were issued: 50% (or 100 million) was made available for the public, 40% (80 million) was granted to the founding team, and 10% (20 million) went to angel investors.
In the crypto world, ICOs are a popular way to raise funds, usually offering tokens or coins directly related to a budding innovative project[2]. It can also be viewed as a direct investment with hopes of getting ahead of the curve.
ICOs not only give out potential assets - you usually also need cryptocurrency in order to participate in the first place. In Binance’s case, the ICO was done in BTC and ETH.
In the whitepaper announcing the ICO, Binance pledged to maintain the supply of BNB at no more than 200 million units. To achieve this, the company periodically buys back and burns the asset. The goal is to buy back 50% of all BNB, eventually leaving only 100 million in circulation.
Now, as I previously noted, BNB started off as a token released on the Ethereum blockchain based on the ERC-20 token standard. However, eventually, it was "transferred" to a blockchain of its own. Well, not actually transferred, but a new version was released, and then the old version was swapped for the new one.
The new version I'm referring to was based on the BEP-2 token standard and released on the BNB Beacon Chain. However, later, in 2020, the BNB Smart Chain was released together with a new BNB token form – BEP-20.
While we're on the topic of what is BNB crypto history, it’s worth mentioning that in 2022, the BNB Beacon Chain and its improved version Binance Smart Chain merged to become BNB Chain, which now is a dual blockchain. Thus, different BNB versions have the same worth and can be utilized regardless of origin.
What is BNB Used for?
With any cryptocurrency, its usability is a crucial factor, which is why it's important to discuss what is BNB crypto used for. After all, by design, most crypto assets aren't statuettes that you keep on a shelf - they're meant to be used.
Luckily, BNB boasts a plethora of use cases within the Binance ecosystem and beyond. I'd even go as far as saying that it is one of the most versatile cryptocurrencies on the market:
- Transaction Fee Coverage. BNB serves as the native utility token of the BNB Chain ecosystem. Users can utilize BNB to pay for transaction fees on the Binance Smart Chain and the BNB Beacon Chain. This feature provides users with a cost-effective and efficient method for conducting transactions within the ecosystem.
- Access to dApps. BNB holders can explore over 5,000 dApps on the BNB Chain. These dApps cover a wide range of functionalities, including gaming, finance, and social networking. Users can interact with these applications, pay transaction fees, and even earn rewards in BNB and other tokens.
- Staking and Governance. What is BNB staking? It enables users to participate in the governance of the BNB Chain. By staking their tokens, holders can contribute to network operations, participate in decentralized governance decisions, and receive rewards in BNB.
- DeFi Applications. BNB plays a crucial role in the BNB Chain's decentralized finance (DeFi) ecosystem. Users can access various DeFi applications, including decentralized exchanges (DEXes) like PancakeSwap, where BNB is used to pay transaction fees and participate in liquidity pools.
- Trading Discounts. Holding BNB provides users with discounted trading fees on the Binance exchange (25% of spot and margin fees and 10% off USDⓈ-M Futures contracts). Additionally, users can qualify for Binance's VIP program, which offers further discounts and exclusive benefits based on trading volume and BNB balance.
- Token Sales and Launchpad Access. BNB holders gain access to exclusive token sales on Binance Launchpad, where early-stage blockchain projects are introduced. BNB plays a vital role in these token sales, acting as a key driver of engagement and providing users with opportunities to invest in promising projects.
- E-commerce and Travel. BNB can be used for real-world applications such as booking flights, hotels, and other travel products on platforms like Travala.com. Additionally, BNB can be used for e-commerce payments at merchants that accept cryptocurrency, providing users with greater flexibility and utility. This can all be done using Binance Pay.
- Entertainment and Rewards. Binance periodically hosts events and activities where users can participate and earn rewards in BNB and other tokens. These events encompass a variety of games and challenges, offering users an opportunity to engage with the Binance community and earn rewards in the process.
Overall, it's natural that more and more people wonder what is BNB. The diverse range of use cases it has underscores its importance within the crypto ecosystem. From facilitating transactions and governance to providing access to decentralized applications and trading perks, BNB continues to play a pivotal role in driving innovation and adoption within the Binance ecosystem and beyond.
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BNB Burns Explained
When discussing what is Binance coin, we can’t overlook one important detail, and that’s the aforementioned burning process. Exactly as the name suggests, it’s the "destruction" of the coins, and it can be done by individual users, as well as Binance itself.
Coin burning permanently removes assets from circulation. BNB goes through auto-burn, which adjusts the number of coins to be burned according to the price of BNB and the number of blocks generated during the quarter.
The burning also includes a portion of the BNB spent as gas fees on the BNB Chain. What is BNB's burning aim? Well, mostly is to keep BNB as a relatively supervised coin without letting its numbers get out of hand. While there are both pros and cons to this strategy, keeping a lid on the "coin population" could help boost its longevity.
Users can burn their coins manually. The procedure is fairly simple: you select the amount of coins you want to burn, and the system verifies the request. If the information is correct (as in, you’re not trying to burn more coins than you have), the action is then recorded on the blockchain.
In essence, burning is an act of sending your crypto into a dead wallet. No one knows the login codes; therefore, the assets that land there will not be used. This basically takes the coins or tokens out of circulation.
Burnt assets can never be recovered, so users need to be careful. Pioneer users can take advantage of the BNB Pioneer Burn Program, an incentive for those who lost their assets by mistake during the shift to Binance Smart Chain.
There’s a method to the burning madness, though! Fiat money is often adjusted by banks, too, mostly to increase its purchasing power. Similarly, cryptocurrency can be burned (and its number therefore adjusted) to hopefully increase its value, as well.
However, you should note that there’s no direct correlation between burning and value increase (or decrease). Mostly, the burning provides transparency and predictability to the BNB community.
BNB Vault and Staking
Since we’ve mostly covered the topic of what is BNB, you might wonder why this particular coin stands out from others. Well, one notable feature is BNB Vault and BNB staking. Let’s say you have BNB that you don’t necessarily need right this moment, but you also don’t want to leave it sitting out, either - you can choose to employ your coins.
You can place your BNB into a proverbial vault, which will earn you benefits over a certain period of time. In the crypto industry, this act is called staking.
In Binance's case, when you stake your coins, they will be used to support the security and operations on the network. Simply put, staking helps validate transactions on the blockchain. Primarily, staking was only possible on blockchains that employ the Proof-of-Stake (PoS) consensus mechanism.
However, the BNB Smart Chain, which supports the BNB coin, uses a model called Proof of Staked Authority (PoSA). It’s a system involving validators and delegators; it requires 21 validators (BNB Smart Chain relies on a system of 50 validators) to operate and supports short block creation times and low fees.
Both validators and delegators reinforce the community and its transactions, but only validators can directly process the latter.
Validators have very specific requirements, and this role is not recommended to those who are new to the crypto scene. However, what if you still want to take part in BNB staking? The good news is that you can become a delegator.
Delegators supply validators with BNB to facilitate their work. When you stake your coins, you can select a preferred validator, and your BNB will help them achieve their goals. In turn, validators share their reward for helping maintain the blockchain with the delegators who pooled their stakes in a show of support – a win-win situation.
By Binance’s own admission, BNB Vault is a yield aggregator that lets BNB holders flexibly deposit and withdraw BNB. It combines rewards from Simple Earn and Launchpool and offers competitive returns. Here are some of the benefits of staking BNB:
- Receive Flexible Product real-time APR rewards;
- Get new Launchpool tokens from staking;
- Gain income from DeFi Staking offerings;
- BNB Vault allows you to maximize your yields and gain benefits from various staking opportunities.
That said, keep in mind that if you stake your coins, you will not be able to freely use them during the time. This means that if you suddenly want to use your BNB to purchase something, you will not be able to utilize your assets until they are released. If you want a liquid staking alternative, though, Binance provides you with ETH staking.
Just be sure to look into the rules surrounding various staking methods and evaluate if you can meet the requirements.
Where to Buy BNB?
After all this talk about what is BNB crypto, you might ask yourself where to get these digital assets. The answer is fairly simple - due to their popularity, you can obtain BNB from pretty much all the major exchanges. However, more often than not, it's a roundabout method that involves trading other assets for BNB.
If you're looking for a direct acquisition, Binance is your best bet. And let’s face it, you will get the most bang for your buck if you utilize BNB within its parent company since none of the staking benefits or reduced fees will work outside of the Binance platform.
Binance offers a variety of payment methods, including bank transfers, credit and debit cards, Apple Pay, and more. Overall, Binance supports more than 50 fiat currencies, but keep in mind that all payment methods are affected by your location.
BNB Chain and BNB
When it comes to the question of what is Binance coin, there are two concepts we need to discuss even in more detail: Binance and BNB Chain. Despite how intertwined they are (or at least started out as), currently, they need to be considered as two separate concepts.
Binance is one of the largest digital asset exchanges in the world. It's a supervised platform that allows users to buy and sell crypto, and there are plenty of additional perks intended to help improve your knowledge, grow the value of your coin, and cultivate new ideas.
You already know what is BNB Chain – a distributed blockchain network. It serves as a stepping stone toward Web3 blockchain technology and allows developers to build decentralized applications.
As previously mentioned, BNB Chain consists of BNB Beacon Chain (once known as Binance Chain) and BNB Smart Chain (used to be Binance Smart Chain).
This decentralization of the network means there’s no person or company in charge, the safety of transactions is ensured by technology (through smart contracts), not a third party, and developers can design a product that will reach great audiences.
Due to the obvious connection to Binance, BNB is important in this decentralized network as well. So, the question of what is BNB goes above just the fees on the one exchange. There are perks that extend beyond trading, and it will likely grow as the network expands.
Currently, BNB Chain seeks to establish itself as a community-driven, open-source and decentralized ecosystem running on several chains.
CEXs & DEXs in the Context of BNB
Simply put, Binance is centralized, and BNB Chain is decentralized. Despite coming up with the idea for the network, Binance doesn’t own anything, and BNB Chain is fully independent.
Centralized exchanges (CEXs) are platforms that support crypto exchange between their users. They’re beginner-friendly, but you need to register and confirm your identity to use the platform. After you put your assets into a CEX account, the exchange holds your tokens on your behalf; but in turn, if something goes wrong, you can contact support to help you out.
DEXs, on the other hand, stand for “decentralized exchanges”. They use smart contracts and, in theory, could run themselves endlessly as long as users provide sufficient liquidity.
You don’t have to register to use a DEX, you only need to have some cryptocurrency and a wallet. DEXs might be a bit harder to get into than CEXs, but these networks have perks that CEXs don’t offer.
You might wonder why a tutorial centered around “What is a BNB coin” needs to delve into the topic of a new decentralized network, and the answer is simple. As mentioned before, BNB coins can be used on both the Binance platform and BNB Chain.
It is considered the native asset of BNB Chain, where it can be used on various dApps. This means BNB utility extends further than the singular system, and its applicability continues to expand as long as there are more improvements within Binance-related networks.
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BNB Chain & dApps: PancakeSwap
One of the innovations that were created with decentralization in mind is dApps, and one notable example is PancakeSwap. It's a decentralized exchange based on the BNB Smart Chain.
Since it’s decentralized, you have 100% control over your crypto and don’t have to register to use the application - all you need is a wallet. To those familiar: PancakeSwap functions similarly to SushiSwap, which is built on the Ethereum blockchain.
There's a simple reason why we talk about PancakeSwap when discussing what is BNB. The asset is closely tied to this service, you can even pick BNB Chain as your preferred network.
PancakeSwap works using an Automated Market Maker (AMM) model. This eliminates the need for an intermediary to facilitate trading, and you’re not matched with anyone else during the transaction.
The trade happens to utilize the liquidity pool that’s supported by other users’ funds. If you provide liquidity for others to use, you receive special LP tokens that can be used to reclaim your share of assets you put up for liquidity, as well as a portion of the trading fees.
PancakeSwap even has a token of its own called CAKE. It’s built on BEP-20, a standard used to produce tokens for the BNB Smart Chain. To put it simply, the BEP-20 standard is a list of functions that a token needs to meet to be allowed to function within the Binance ecosystem.
On top of that, you can participate in a PancakeSwap lottery in hopes of gaining more CAKE. Or, if you’re into NFTs, you can sign up for a chance to win one. It all functions within a singular decentralized platform, made possible by BNB Chain and the BNB coin.
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Conclusion
With all that we overviewed, hopefully, you now know what is BNB and how to use it. As one of the most popular and widespread crypto assets, BNB has more inherent value than appears at first glance.
You can buy and sell BNB like any other crypto. However, you may want to keep it as a supplementary coin to cover trading fees. You can also choose to stake it, as BNB staking can be a viable way to both increase your funds and help out the network itself.
However, even the aforementioned use cases are not all. When it comes to BNB, you certainly have use cases to pick from. So, if you're for a union between utility and potential, BNB fits the bill perfectly. The fact it is native to one of the largest exchanges in the crypto world also enhances its promising nature.
Ultimately, BNB offers accessibility and rewards to new and experienced users from several fields of interest, from straightforward trading to keeping decentralized networks running.
Scientific References
1. R. M. Farell: 'An Analysis of the Cryptocurrency Industry';
2. S.T. Howell, M. Niessner: 'Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales'.
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