Topics Altcoins
Bybit Learn
Bybit Learn
Intermediate
Jul 8, 2022

What Is Binance Coin (BNB) And Is It Worth Investing In?

Binance Coin, now known as BNB coin, first started as an ERC-20 standard token built on the Ethereum blockchain. It is a native token of the Binance ecosystem and powers the BNB chain ecosystem.

The Binance Coin (BNB) was launched in 2017 through an initial coin offering (ICO) as an asset to allow users of the new exchange to pay fewer trading fees. Within a year, it gave its early investors a whopping 1,300% return. Backed by such a stellar performance, Binance Coin's popularity rose quickly as it became one of the crypto market's favorite coins.

This article will cover what a Binance Coin is, its uses and applications, and whether the Binance Coin is worth your investment.

Binance Coin History

Binance Coin (BNB) plays an essential role in the Binance ecosystem by powering operations. Among other things, the coin was designed to pay listing fees, exchange fees, trading fees and any other expenses that users can incur on the Binance cryptocurrency exchange.

Initially, Binance Coin had a total supply of 200 million tokens. During the Binance ICO, 100 million of the coins (or one-half) were allocated to the public, while 80 million were kept aside for Binance branding, with the remaining 20 million allotted to angel investors.

Binance Coin was originally issued as an ERC-token on the Ethereum blockchain. In 2019, Binance launched its blockchain, Binance Chain, now known as BNB Beacon Chain. The BEP-2 BNB coin was introduced as this chain's native token, and users of the old ERC20-compliant BNB token swapped it for the new token at a 1:1 ratio.

Later, in 2021, the Ethereum blockchain network was facing congestion due to high traffic, and gas fees for carrying out transactions spiked rapidly. Developers were facing transaction issues because of the slow speed.

Developers started using the BNB Beacon Chain because of its fast transaction processing and cheaper gas fees. As use of the BNB Beacon Chain increased, BNB Coin gained in popularity.

Binance has expanded beyond just a digital asset exchange since then, and BNB remains an integral part of the Binance ecosystem.

Binance Coin: How It Works

Binance Coin fuels the transactions in two parallel-running blockchains in the BNB Chain: The BNB Beacon Chain, and the Binance Smart Chain (BSC). The BNB Beacon Chain is Binance’s first blockchain, focused on staking and governance for BNB holders. Meanwhile, BSC Chain is an Ethereum virtual machine (EVM)-compatible blockchain that serves as an alternative for the Ethereum network and facilitates the formation of smart contracts.

BNB Chain uses a unique consensus mechanism known as proof of staked authority (PoSA) for validating transactions and governing its network. This system is a combination of delegated proof of stake (DPoS) and proof of authority (PoA) consensus algorithms. This means that the Binance Coin is used in both the Binance Chain and the BSC Chain for various actions, from transactions to staking.

To combat devaluation, Binance purchases back token supplies every quarter and burns Binance Coins to reduce supply. The platform aims to eliminate half of its circulating cryptocurrency tokens (200 million total). The 19th quarterly BNB burn took place in April 2022, burning close to 2 million BNB tokens from the system.

Per Changpeng Zhao, Binance CEO, it will take another five to eight years to burn the promised 50% of the supply (instead of 27 years), owing to the new auto-burn mechanism.

BNB coin quarterly burn

Source: Twitter

What Is Binance Coin Used For?

The use cases for BNB coins are continuously increasing as the BNB Chain expands. Currently, the Binance Coin can be used for:

  1. lending on DeFi protocols such as Venus
  2. exchanging on DEXs such as PancakeSwap
  3. playing crypto games
  4. trading NFTs
  5. staking to earn rewards

When you use BNB to pay fees in the Binance ecosystem, you receive a significant discount on trading (around 25% as of this writing) due to Binance’s fourth-anniversary promotion.

Apart from the virtual coin’s use in the Binance ecosystem, traders can use BNB for a wide array of real-world benefits:

  • Travel
  • Credit card payments
  • Donations
  • Investments
  • Buying virtual assets

Binance has recently partnered with VISA for its Binance crypto card, which works similar to a debit card. You have to fund the card with BNB coins to make payments (wherever VISA cards are accepted).

Binance Coin Price Prediction: Is BNB a Good Investment?

At the time of its launch, Binance Coin had 200 million tokens in supply. It currently has a circulating supply of around 163 million BNB coins, and a maximum supply of more than 165 million BNB coins. The current circulating coin collection is less than the initial supply because of Binance's token burning policy.

It was sold at $0.15 during the ICO and is currently trading at $241.06 at the time of this writing. BNB coin is the fourth largest cryptocurrency in the world, and its market cap stands at more than $35 billion.

Price of BNB from 2 July to 8 July 2022

Source: CoinMarketCap

Some experts hold the bullish prediction that BNB’s price will reach a maximum high of $303.71 by the end of the year, and continue rising every year up to a high of $1,016.75 by 2030.

While BNB coins generally have a good reputation in the market, there have been financial allegations of money laundering against the exchange recently. In response, the U.S. Securities and Exchange Commission has opened an insider trading case against the exchange, which has led to a decline in BNB coin prices.

This has possibly led to WalletInvestor’s bearish short-term outlook, predicting that BNB could fall to just $18.81 within the year.

Hence, it should be noted that the BNB Coin is a high-risk, high-reward investment. As an investor, be aware of this and do your due diligence before investing your hard-earned money.

How to Buy Binance Coin (BNB)

Binance Coin (BNB) can be bought and sold on many crypto exchanges, as it’s a popular coin in the market. With Bybit, you’ll be able to trade BNB either as a derivative or spot, and you can also stake and earn BNB.

Bybit Stake page – BNB Product Plan

Source: Bybit Earn

Buying BNB Through Bybit

To purchase Binance coins from Bybit, you’ll first need an account with Bybit and relevant documents for KYC verification.

You can sign up with your email ID to create a new account on the Bybit trading platform. If you already have an account, then sign in.

Once you’ve signed in to your Bybit account, you need to first purchase USDT coins using either of the three methods listed below:

  1. Fiat Gateway: You can buy USDT in less than five minutes via Bybit Fiat Gateway by linking your credit or debit card to your Bybit account. You’ll be redirected to the Express page when you initiate the payment transaction using a credit or debit card.
  2. Peer-to-Peer Transaction: Using P2P trading, you can make a purchase or sale with no transaction fees. P2P trading allows two traders to buy and sell USDT coins at a mutually agreed-upon price. To use the P2P trading option, click on Buy Crypto, choose P2P trading, and buy your coins.
  3. Third-Party Payment: Third-party payment requires traders to complete their KYC before purchasing. Once KYC is verified, a third-party channel will complete the transaction orders, and the USDT will be credited to the buyer’s account. To make a third-party payment, head to the Express page and choose a third-party provider under the payment option.

Trade USDT for BNB as a Derivative

Once you’ve bought your USDT, you’ll be able to trade BNB as a derivative. First, head to the Derivatives section and look for BNBUSDT under USDT Perpetual. Click on it and you’ll be directed to the trading terminal.

Trade USDT for BNB as Spot

Otherwise, to perform spot trading, go to Trade and select Spot TradingBNB/USDT.

Stake BNB with USDT as a Dual Asset

You can also earn BNB staking rewards by staking it as a dual asset with USDT. You’ll be able to earn USDT when its price rises, and earn BNB when its price falls. Either way, you’re earning!

The Bottom Line

BNB Coin has come a long way since it was launched as an ICO in 2017. Despite the recent crash in the crypto markets, its performance has been quite impressive. Binance is continuously working on consolidating its market share in the crypto industry and making new innovations. Overall, one can say that the BNB coin seems a promising cryptocurrency among the many cryptos listed.