There are over 2500 cryptocurrencies for investors to choose from in this exhilarating world of crypto. However, over 95% of these coins are predicted by many experts in the industry to eventually fail. This is largely due to their intended use cases never taking off or attaining any real-world adoption.
That being said, to be a successful investor in this space, one must identify the projects and cryptocurrencies capturing value right now. Mix this with some healthy speculation and these types of coins will perform very well. Now there are a variety of cryptos falling into this category and one such type are exchange tokens.
Exchange tokens are one of the few types of cryptocurrencies actually being used by real people and real companies. They have utility as they can be used to pay fees, grant users’ discounts, and provide access to exclusive exchange offerings. Exchange tokens are essentially backed by real companies who generate profit and utilize their tokens.
One of the very best exchange tokens comes from Binance, the world’s biggest cryptocurrency exchange in terms of trading volume. Binance’s exchange token is Binance Coin (BNB) and it’s one of the top performers of 2019.
Binance was founded in 2017 by Changpeng “CZ” Zhao. The exchange offers a global trading platform of more than 100 cryptocurrencies and is considered as the biggest cryptocurrency exchange in the world in terms of trading volume.
Binance Coin (BNB) was initially launched as an ERC-20 token on the Ethereum blockchain. The launch was through an Initial Coin Offering (ICO) that took place from June 26 to July 3, 2017. The issuing price for BNB was 1 ETH for 2,700 BNB or 1 BTC for 20,000 BNB. 100 million BNB tokens were sold in the ICO out of a total supply of 200 million coins.
The exchange raised approximately $15 million and the funds were used in three different ways: 50 percent were used for Binance branding and marketing; 35 percent were used to build out the platform and system upgrades, and 15% was reserved for emergency funds.
Since BNB’s initial launch on Ethereum, it has migrated to Binance’s proprietary blockchain, Binance Chain in 2019.
The Purpose of Binance Coin (BNB)
As previously mentioned, a cryptocurrency token is not worth investing in unless it captures value and has a use case. Binance Coin meets these criteria by having multiple use cases and thus capturing value. See BNBs use cases below.
Trade Crypto with BNB
The first use case I'll mention is for trading cryptocurrencies on the centralized Binance exchange and the Binance DEX (decentralized exchange). The Binance DEX is open to traders from anywhere in the world and the centralized Binance exchange is open for everyone except for residents residing in the US. On Binance’s exchanges, BNB can be used to trade over 100 different cryptocurrencies with the BNB crypto trading pair.
Pay Trading Fees with BNB
In addition to the BNB markets, Binance Coin can be used to pay for trading fees within the Binance exchanges. Binance charges a standard trading fee of 0.1% which can either be paid in the assets you’re trading or with BNB. Traders who opt to pay with BNB will get a special discount on their trading fees. The BNB trading fee deductions follow a predefined schedule that reduces the discount every year until 2021.
- The first year BNB launched (2017) traders received a discount of 50%
- In 2018 traders received a discount of 25%
- In 2019 traders receive a discount of 12.5%
- In 2020 traders receive a discount of 6.75%
- In 2021 traders no longer receive a discount
Exclusive Access to Binance Launchpad
Another unique use case for BNB is the ability to participate in token sales on the Binance Launchpad, which hosts Initial Exchange Offerings (IEO) for new cryptocurrencies. All projects that launch on Binance Launchpad sell their new cryptocurrency tokens exclusively for BNB. As of September 2019, there have been 10 IEOs on Binance Launchpad where millions of dollars worth of BNB was raised.
BNB as a Payment Method
Apart from all of the Binance ecosystem use cases for BNB, the token can also be used to pay for things outside of the exchange and its services. BNB can be used as a payment method with 30 different companies enabling users to pay for everything from travel, gifts, clothes, food, stocks, real estate, and more. Additionally, Binance is partnered with multiple payment processors so that BNB can be used in-store or online at certain businesses and locations.
Powering the Binance DEX (Binance Decentralized Exchange)
Once BNB migrated to Binance Chain it became the blockchain’s native coin and is used as fuel for transactions and thus powers the Binance DEX.
Controversy Surrounding Binance and BNB
Binance may be the biggest cryptocurrency exchange by trading volume and its BNB token has appreciated over 9000% since launch, but that doesn’t mean Binance and its token are without faults.
Binance has grown to where they are today by not doing any AML / KYC (anti-money laundering/know your customer) checks on their customers, so long as they don’t withdrawal no more than 2 Bitcoin a day. By doing this, they have dogged regulations and operate as an unregulated exchange. This poses a big problem for Binance, for as the crypto industry grows and garners more regulation, regulatory authorities may come after Binance and attempt to shut them down.
We can already see the preliminary results of a regulatory crackdown, for as of September 2019, US customers are being forced to leave the Binance exchange. Binance is combating the issue of losing their large US customer base by launching a new US-based exchange dubbed Binance.US. However, it’s still unclear whether or not BNB will be listed on Binance.US due to speculation that the US Securities and Exchange Commission (SEC) will deem BNB security. Therefore, this will no doubt hurt BNB’s use cases and adoption. In fact, BNB is already down 48% from its all-time high at the time of this writing.
Another downside to BNB is the fact that Binance is a centralized entity and the BNB token is largely dependent on the exchange’s success. If for whatever reason a large majority of traders move onto an alternative cryptocurrency exchange, the BNB token will undoubtedly lose value. Adding to the centralization issue, when Binance launched BNB they only sold half of the 200 million tokens, therefore they own and control 100 million BNB tokens.
To make matters worse, BNB is used to pay trading fees and therefore Binance is acquiring more and more BNB all of the time (making their stack even larger). However, the exchange does have a token burn initiative in which they claim to “burn” 20% of the BNB trading fee profits each quarter until 50% of the total BNB supply (100 million BNB) is burned. But since they already hold 100 million coins, they can just burn BNB out of their 100 million stacks. At the time of writing, over 12 million BNB has been burned and the total supply is now 187,536,713 BNB.
All in all, there is a lot of controversy surrounding Binance and BNB, which is largely due to the token’s ties to the centralized Binance entity.
Just like any other cryptocurrency, Binance Coin (BNB) has competitors. In fact, BNB has quite a few competitors. Any cryptocurrency exchange that issues its own utility exchange token is a competitor.
BNBs biggest competitors in no particular order include Huobi’s (HT), Kucoin’s (KCS), DeversiFi’s (NEC), Cobinhood’s (COB), LAToken’s (LAT), Bibox’s (BIX), Bitfinex’s (LEO), and OKEx’s (OKB).
Despite all of the competitors listed above, BNB leads the pack as the number 1 cryptocurrency exchange token with a market cap among the top 10 cryptocurrencies at over $3.2 billion. There’s no question that BNB is the leading exchange token as it has multiple use cases within and outside of the Binance ecosystem. Additionally, unlike other exchange tokens, BNB is utilized on both Binance’s centralized exchange and the Binance DEX.
Despite underlying concerns over BNBs heavy reliance on the centralized exchange, Binance, it is still the best exchange token on the market. Binance Coin is strongly utilized throughout the expansive Binance ecosystem and even has a use case outside of Binance as a payment method.
Furthermore, it doesn’t appear that Binance will be going anywhere anytime soon. Binance’s CEO, CZ is always innovating and appears to be two steps ahead of everyone else. Additionally, the total supply of BNB is steadily dropping until there are only 100 million tokens. Combine this with BNBs expansive use cases and it appears that BNB will continue to stay relevant and maintain its position among the top 10 cryptos for years to come.
What do you think about BNB? Is it a safe investment? Will another exchange token surpass and become number 1? Let me know what you think in the comment section below.