Binanace BNB Coin Overview
Many cryptocurrency traders are familiar with Binance. It’s one of the largest and most active cryptocurrency exchanges in the world today. Binance is somewhat unique in that it has created its own digital token. The coin is traded under the symbol BNB, and it has become a favorite of many traders who use the Binance exchange. Here is the information you need to know before adding this token to your portfolio of digital assets.
About the BNB Token
The Binance Coin, or BNB, was first an foremost created to help fund and expand the development of the Binance exchange. In large measure the ICO for the token helped to make Binance one of the world’s top cryptocurrency exchanges. BNB was built on the ERC20 model, and it runs on the Ethereum blockchain.
This, of course, is common among many altcoins that are introduced today. The Smart Contracts used by the Ethereum platform make it possible for developers to create new tokens. In the case of BNB, the goals of the token were to provide funding and other functions for the Binance exchange. The ICO was a novel approach at the time, but the venture paid off well.
Binance has only been around since 2017, but in that short period of time it has seen the 24-hour trading volume for BNB soar to 1,472,557 while Bitcoin trades at about 176,000 in volume each day. Those numbers have made the exchange very popular. It also helps that the reputation of the company hasn’t suffered any serious blows yet.
When the BNB coin was issued in July of 2017, it had an initial value of around $0.15. It has seen values rise as high as $14 since it’s debut, providing a good return on investment for traders. As such, the coin as come to be called “The Traders Coin” and is a favorite of those who actively follow the crypto markets.
A total of 200 million BNB tokens were created. The fixed number of tokens in circulation and the promise of something called a burn make this coin an interesting subject of speculation.
What is the BNB Burn?
Like all ICOs, the one for BNB included a whitepaper from the developers. This whitepaper outlined how the token was developed, the reason for its creation, and all of the protocols associated with it. The document also made mention of a burn.
The idea behind the BNB burn is simple. The developers have promised to set aside a portion of each year’s profits to buy back BNB tokens. The tokens that are bought will then be destroyed. This will continue until half of the initial supply is eradicated, leaving 100 million tokens. The buybacks are added to the blockchain to create a permanent record.
On April 15, 2018, more than 2 million tokens were burned. It is expected that the next burn will take place in July. It is assumed that the reason for the burning is to increase the value of the remaining tokens. This, of course, is predicated on the demand for the coin remaining stable. If demand were to increase, each burning would result in more value being created.
Burns of the BNB token can create unique opportunities for day traders of cryptocurrency. A spike in price generally happens before a burn, and after the burn the value of the coin will drop some. The past indications are that the pull back after a burn will still leave the coin with a greater value than it had before the buyback.
Purposes of the BNB Token
BNB exists first and foremost to power the Binance exchange ecosystem. Those who choose to trade with Binance can pay their trading fees with the token. Those who choose to do so are given a 50% discount on fees for the first year. This makes for a powerful incentive.
All cryptocurrency exchanges make a profit from trading fees. At Binance, traders can take advantage of reduced fees when they maintain BNB tokens in their exchange wallet and use those tokens to pay the costs of trading on the exchange. The discount begins at 50% for the first year and then decreases on a sliding scale over the next five years. After year five, there is no discount for paying with BNB.
Traders can configure their account to automatically pay fees with the BNB token. It is also possible to store BNB tokens on hardware wallets like the Trezor because it is an ERC20 token.
There are plans in the works to develop a decentralized crypto exchange that is built around BNB. This platform will be called Binance Chain. The ultimate goal of Binance Chain is to facilitate both trading and exchanges between various blockchains.
The future for the BNB token looks bright. It is a worthy addition to a portfolio of digital investments. The presence of the burns and Binance’s long-range goals for the token have a lot of upside, and this could mean that the coin will continue to appreciate in value as time goes by.