What Are The Top 3 Things People Get Wrong About Binance Coin?

What's BNB?

Binance Coin (BNB) is the cryptocurrency of Binance exchange — the world’s largest crypto exchange by volume. BNB was launched via an initial coin offering (ICO) in July 2017, with one token going for 15 cents each.

BNB ran on Ethereum but moved to Binance’s native chain in 2019.  The company gave users the new BEP2 version BNB tokens in exchange for their ERC-20 tokens through a token swap. The standalone BNB offers extremely fast throughput and low transaction fees, which make it ideal for decentralized exchanges like PancakeSwap.

BNB is like any other cryptocurrency — it fluctuates in response to market activity. Although originally used within the Binance ecosystem, it has evolved for use in many other parts of the crypto industry.

Here are the top three things people get wrong about BNB:

1) BNB Represents the Stock of the Company Binance

Folks still being acquainted with the cryptoverse or BNB itself can easily think the ticker represents Binance’s stock like the ticker “TWTR” is for Twitter stock. However, BNB is the ticker symbol that represents the native currency of the Binance blockchain. BNB is Binance Coin issued by Binance.

BNB first launched on Ethereum before migrating to Binance’s mainnet. Binance launched the coin in 2017, with a maximum supply of 200 million. Originally, BNB acted as an incentive for traders. If you have some BNB tokens in your account, you can get 25% off on your trading fees, and it still gets you trading fee discounts to this day.

However, the uses of BNB have expanded in recent years. It’s accepted as payment in a bunch of services, including travel,  internet, charity donations, and credit card payments. Cryptwerk lists businesses that accept BNB.

You can also use your currency to invest in ICOs listed on Binance’s Launchpad program. The Binance Launchpad is an initiative through which new and quality crypto projects are introduced to the world. BNB is also supported by Monaco, the crypto payments company.

2) Binance, Binance Smart Chain, and Binance Chain are all the Same Thing

Except that they aren’t. Binance is the entity that’s sprouted BNB, Binance Chain (BC) and Binance Smart Chain (BSC). Binance Smart Chain is a more sophisticated version of Binance Chain. The latter was launched by Binance in 2019 to facilitate fast peer-to-peer trading as well as support Binance DEX.

However, Binance Chain faced weaknesses inherent to public blockchains, such as scalability issues and lack of flexibility (including lack of interoperability of blockchains). As such, Binance Chain couldn’t handle the increasing demands of blockchain tech. It also cannot offer developers the functionality to experiment with and build applications.

Binance Smart Chain runs parallel to Binance Chain. It features smart contracts’ support and is compatible with Ethereum’s Virtual Machine. The idea behind BSC was to achieve the best of both worlds: the high throughput of Binance Chain, and the smart contract support of Ethereum.

BSC is not a Layer 2 network designed to improve Binance Chain the way the Lightning Network is to Bitcoin. It’s independent from Binance Chain, essentially running side by side.

BSC’s compatibility with Ethereum means the various toolings and ecosystem components in Ethereum can work with BSC with little to no modification. Also, it allows for developers to port their projects from one blockchain to another.

BC and BSC employ what’s known as “dual-chain architecture”, which means users can seamlessly swap tokens from one blockchain to the other. This creates interoperability that grants users an environment that supports a slew of use cases.

Other things that distinguish BC from BSC include the following:

• BC employs Delegated Proof of Stake (DPoS) to validate transactions, while BSC uses Proof of Staked Authority (PoSA) — a cross between Proof of Stake and Proof of Authority consensus mechanism
• BC employs 11 validators, with BSC using up to 21
• BC has a block time of 1 second, while BSC’s is 5 seconds
• BC supports the BEP-2 technical standard for issuing and implementing tokens on the Binance Chain. BSC is compatible with the Ethereum Virtual Machine and smart contract functionality and issues BEP-20 tokens.

3) BNB’s Supply is Inflationary

BNB is not inflationary. It employs coin burning to control supply and reduce inflation. Coin burning involves intentionally sending cryptocurrency coins or tokens to an inaccessible address or wallet.

Doing so pretty much removes the tokens from the realm of cryptocurrency, so to speak. The goal of coin burning is to remove those coins from circulation and in so doing, improve the scarcity and desirability of the token, deflationary measures.

BNB’s initial supply was 200 million. At the time of writing, these are something above 166 million in circulation. In the beginning, Binance committed to burning tokens quarterly so as to reduce them to half the original supply.

The most recent burn was in July 2021. The company got rid of BNB worth $390 million. In April, it had destroyed nearly $600 million of the token. April’s burn was the highest USD value burn in the currency’s history.

Indeed, BNB’s burn mechanism seems to have done favors to its market standing. The deflationary impulse created by the burning routine has helped the currency claw its way to third place in market rank, behind only Bitcoin and Ethereum.

Final Thoughts

BNB needn’t be complicated. It’s the native cryptocurrency created by Binance, the world’s largest exchange. People can use it as payment for a diverse range of services. Binance Chain and Binance Smart Chain are complementary and run side by side, each backing up core functions of the Binance ecosystem.

BNB follows Bitcoin’s toes in having a deflationary mechanism, except it employs token burning. BNB is an integral part of the crypto scene, and being armed with the facts can help you navigate it more confidently.