As mentioned in my previous articles, the upcoming Ethereum Merge is a real technical challenge, and hence, it could fail. All the large investors are getting ready for this possibility and have started to invest into other coins and tokens, in case of. Today, we are going to explore Binance Coin (BNB).
Why Binance Coin (BNB) is an alternative to Ethereum (ETH)
BNB Smart Chain was initially launched in 2020 as an EVM (Ethereum Virtual Machine) compatible blockchain allowing to invest into DeFI (Decentralized Finance) with lower gas fees than on Ethereum chain. It is powered by Binance Coin (BNB), renamed "Build & Build".
The validator staking requirement on BNB Smart Chain is 10,000 BNB (currently about $3 million) whereas it is 32 ETH (currently about $54k) on Ethereum. Therefore, there are less validators (only 21) on BNB Smart Chain than on Ethereum (400k+ on Proof-Of-Stake chain).
Therefore, we can consider that BNB Smart Chain is less decentralized than Ethereum. Furthermore, the transaction fee which used to be an advantage of BNB Smart Chain have decreased on Ethereum mainnet, and there are now Ethereum layer-2 rollups like Optimism with competitive transaction fees vs. BNB Smart Chain. Therefore, BNB Smart Chain has lost its main advantage. It is now mostly used for small cap tokens (& corresponding DeFi protocols).
How Binance Coin (BNB) price could evolve in the near future
No forecast can be guaranteed. However, it is worthwhile to look at the trend:
We can see on the 1 day BNB/BTC chart above that BNB is looking to retest the support at 0.013 BTC. Therefore, it may decline in the next few days. Looking ahead, the support of Binance for a potential ETH fork will urge BNB holders to swap their BNB for ETH in order to get ready for the snapshot.
Google Trends
A key strength of BNB is its brand awareness, mainly due to the hype around Binance and its CEO, CZ. We can compare it with ETH on Google Trends:
As we can see above, BNB (in blue) still generates more searches on the Web than ETH (in red) despite the Merge which is the biggest crypto event.
How to make money with Binance Coin (BNB)
If you own BNB's, you can delegate them to a validator pool on the Binance Smart Chain, with an average return of 4% per year. You can also use the Binance vault, with variable APYs. Another way to leverage your BNB's is to invest them in DeFi lending protocols (e.g., Venus) or liquidity pools (Biswap).
In summary
Although Binance Coin (BNB) has played an important role by allowing small investors to use DeFi protocols with low gas fees, it does not seem to be a long term alternative to Ethereum (ETH) since the layer-2 rollups on Ethereum have significantly reduced the transaction fees. The BNB Smart Chain seems to be now the main chain for the small cap tokens (& the corresponding DeFi protocols) but is not used anymore by the largest investors.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
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