What is Binance Coin (BNB)? A Beginner's Guide
The cryptocurrency realm is vast and intricate, encompassing a plethora of projects and assets, each designed with distinct objectives. A common sight within this domain is the emergence of projects that share overlapping goals. Take crypto exchanges as an example. While there's an abundance of them, each varying in structure and functionalities, their core objective remains the same: to provide a platform for crypto enthusiasts to trade their assets. A notable mention in this context is Binance, one of the world's premier exchanges. Binance doesn't just stop at being a trading platform; it has its native asset, the Binance Coin (BNB), initially introduced as part of Binance's ICO. This coin initially paved the way for reduced trading fees on the Binance platform.
However, BNB's utility has transcended its initial purpose. With Binance's expansion beyond just a digital asset exchange, BNB has fortified its position within Binance's ever-evolving ecosystem. A testament to this evolution is the BNB Chain. Born from the amalgamation of the Binance Chain and BNB Smart Chain, this chain has garnered appreciation for its efficiency in transaction processing and minimal fees.
What Is Binance Coin (BNB)?
Binance, since its inception in 2017, has undoubtedly carved its niche as one of the blockchain industry's giants. Its rise to prominence is closely intertwined with the narrative of Binance Coin (BNB), which has become a cornerstone of its extensive crypto ecosystem. Originally launched in July 2017 as an ERC-20 token, BNB's beginnings are deeply rooted in Binance's history. The coin's launch was facilitated through an ICO, during which 100 million BNB tokens were made available for public sale, priced at a mere $0.11 each. This ICO successfully garnered $15 million, raised predominantly in Bitcoin and Ethereum.
The funds procured from the ICO were judiciously allocated: 35% for technological enhancements to the Binance platform, 50% for branding, marketing, and fostering innovation, and the remaining 15% preserved as a contingency reserve. Notably, within days post the ICO's culmination, Binance launched its exchange platform, marking a significant milestone in its journey.
Fast forward to 2019, Binance unveiled its native blockchain, the Binance Chain (BC). With this development, the previously Ethereum-based BNB underwent a metamorphosis, transitioning to the Binance Chain as its native BNB coin via a token swap. The BNB Chain, a testament to Binance's technological prowess, consists of the BNB Beacon Chain overseeing network governance and the BNB Smart Chain catering to smart contract functionalities.
Today, BNB's significance extends beyond just being a token. It operates as a utility token on the BNB Chain, aiding in transaction fees, asset issuance, and more. Additionally, its value proposition is reflected in its market position, ranking among the top 10 crypto assets by market capitalization. Embodying the ethos "Build'N'Build", BNB epitomizes Binance's vision of fostering collaborative and open-source endeavors in the crypto landscape.
How does Binance Coin work?
Proof of Stake Authority (PoSA)
BNB Chain integrates elements from both the PoS and PoA models to fortify its network.
To qualify as a validator, users are required to stake a minimum of 10,000 BNB.
Those who don't meet this threshold can delegate their stake to a chosen validator, in return for a share of the rewards garnered by that validator.
Beyond the financial stake, validators also put their reputation on the line by operating transparently, as opposed to staying anonymous.
Public operation, though seen in other blockchain miners, is mandatory on the BNB Chain rather than optional.
Notably, the BNB Chain's PoSA system employs fewer validators than giants like Bitcoin or Ethereum. By intentionally limiting decentralization at this validation juncture, the objective is to filter out potential malicious validators. With control centralized among a select group of validators, the system can handle a higher transaction volume more efficiently.
In 2020, the BNB Smart Chain was introduced, bringing smart contract capabilities to the BNB Chain. Through pre-defined conditions, these smart contracts enable two parties to execute agreements autonomously, eliminating the need for middlemen.
The BNB Smart Chain's smart contracts have augmented the network's utility while decreasing the costs of establishing these contracts. Developers are gravitating towards the BNB Smart Chain due to its cost-effective smart contract creation. However, the reduced fees are a result of lesser traffic on the BNB Smart Chain, especially when juxtaposed with Ethereum. As Binance vies with Ethereum and similar blockchains, the trajectory of BNB Smart Chain remains to be seen.
Decentralized Apps (dApps)
The advent of smart contracts also facilitated the development of dApps. Analogous to traditional apps but decentralized, dApps have diverse functionalities. Hosted on the blockchain through smart contracts, dApps eliminate central authority dependence, operating on the BNB Chain's peer-to-peer framework.
The BNB Chain has also ventured into the realm of non-fungible tokens (NFTs), allowing users to craft, amass, and trade these unique tokens. With Binance NFTs being a recent addition, it remains to be seen if they can rival the traction of established blockchains like Ethereum.
The BNB Chain serves as a primary layer (referred to as Layer 1) for various crypto endeavors. Tokens native to these projects are designated as BEP-2 tokens. Envision BEP-2 as a standardized protocol that every asset crafted on the blockchain adheres to, ensuring harmonious interactions among all tokens within the BNB Chain ecosystem.
BNB Coin Burning Mechanism
A unique practice adopted by Binance is the periodic buyback and "burning" of Binance Coins. This process involves Binance allocating a portion of its quarterly profits to repurchase BNB and subsequently eliminating them from circulation. Initiated in 2017, this ritual aims to reduce the total supply of Binance Coins, with the target being the destruction of 100 million coins, equivalent to half of its inception supply. This reduction strategy not only limits the coin's availability but can also influence its market value due to increased scarcity.
Additionally, Binance has introduced the BNB Pioneer Burn Program. This initiative assesses cases where BNB holders have inadvertently lost their coins and reimburses them, with the compensation amount being deducted from the upcoming BNB burn, further showcasing Binance's commitment to its community.
How is the BNB Chain Different from Ethereum?
At a cursory glance, Ethereum and the BNB Chain might seem functionally analogous, but a deeper dive reveals stark contrasts between the two.
Ethereum emerged as a non-profit, decentralized, open-source initiative aiming to enhance the principles introduced by Bitcoin. In contrast, Binance, the entity, was conceived as a profit-driven, centralized, private enterprise with ambitions to spearhead the world's most expansive crypto exchange. Although both platforms are rooted in innovation, their foundational objectives likely diverge.
From a technical standpoint, the consensus mechanisms of the BNB Chain and Ethereum differ. Post "The Merge" in September 2022, Ethereum transitioned to a Proof of Stake system. Conversely, the BNB Chain employs a combined Proof of Stake Authority (PoSA) to authenticate its network activities.
The underlying philosophy of the BNB Chain is distinct. By adopting the PoSA consensus framework, the network's architects have made a deliberate decision to prioritize scalability, even if it means compromising on decentralization. This choice sets the BNB Chain apart from Ethereum's approach.
Furthermore, in a utility comparison, BNB's applications tend to diminish as one drifts from the Binance ecosystem. On the other hand, Ether (ETH) fuels a broader range of DApps, which has consequently magnetized a more extensive user base to Ethereum, overshadowing the nascent BNB Chain.
Pros and cons of BNB Chain
BNB Chain, like its counterparts in the blockchain universe, comes with its own set of benefits and challenges. To provide a comprehensive overview, it's essential to delve into the significant setbacks BNB Chain faced in mid-2023. Predominantly, Binance Holdings, the parent entity of BNB Chain, faced charges from the Securities and Exchange Commission (SEC) for not registering its tokens and platform prior to its 2017 ICO.
Such regulatory scrutiny isn't exclusive to Binance. Ripple Labs, for instance, has been in a longstanding tussle with the SEC regarding the classification of its token. However, Binance has drawn heightened attention with additional securities violation charges. The SEC pointed fingers at co-founder Zhao's influence over Sigma Chain AG and Merit Peak Ltd., both trading entities functioning as market makers for Binance. Allegations arose claiming these firms enjoyed undue advantages in terms of speed and access, with further assertions that Binance mixed vast investor assets, channeling them to Zhao's entities.
Adding to the regulatory woes, the Commodities and Futures Trading Commission (CFTC) raised concerns about Binance's undisclosed trading on its platform through 300 "house accounts". Zhao's response to the CFTC's claims was a blend of surprise and dismay, especially given Binance's proactive cooperation with the regulatory body over the past years.
Security remains another significant concern. Despite Binance's assertions that investors remained unscathed, a security breach in October 2022 saw hackers exfiltrate over $100 million, leading to a temporary halt of the BNB Smart Chain. Binance has since committed to revising its governance structures to avert similar future incidents.
On the brighter side, BNB Chain boasts numerous merits. Its compatibility with EVM smart contracts facilitates seamless migration for dApp developers from other blockchains. The platform's cross-chain bridge feature is particularly attractive for Tether and Ethereum developers. Moreover, BNB Chain supports a wide array of programming languages, complemented by detailed documentation. Its proof-of-stake consensus mechanism promotes quicker transactions, reduced transaction costs, and a considerably reduced environmental impact.
Binance Supported Tokens (BEP2, BEP8, BEP-20)
Both BEP2 and the forthcoming BEP8 token standards receive support on the BC and BSC platforms. While ERC-20 tokens are commonly known, within this network they are termed BEP2E tokens and find compatibility with the BSC blockchain. One can augment these BEP-20 tokens on the platform by appending additional identifiers, including token denomination, the owner's address, decimal precision, and more. This enhancement procedure is termed "token binding."
Exploring the BC platform unveils tokens that are anchored to their respective native tokens, often referred to as "peggy coins". Such tokens also enjoy support on the BSC network, enabling developers to introduce DApps that seamlessly carry out cross-chain exchanges. PancakeSwap's success is a testament to this capability, as it enables trustless transactions on its platform.
The meteoric rise of BSC in 2021 is intricately tied to the success of the PancakeSwap exchange. This decentralized exchange, built on BSC, witnessed exponential growth throughout 2021. Whether you consider its trading volume, its governance token CAKE, or its total value locked, which skyrocketed from $150 million in January to a staggering $2.5 billion by early March 2021. By the time of this report, PancakeSwap had solidified its position as the second-leading DEX, trailing only behind Ethereum's UniSwap.
Staking in the BNB ecosystem requires holders to lock, or "bond", their tokens into a dedicated staking pool. Once bonded, these tokens can be delegated to a preferred validator or nominee. As soon as the nomination process for the upcoming validator set commences, holders have the flexibility to reassign their tokens to a different validator.
Those validators fortunate enough to get elected wield the authority to allocate their block rewards among their respective delegators. This mechanism encourages participation and ensures that the rewards are distributed fairly among contributors.
To ensure interoperability with Ethereum, BSC has strategically positioned its staking mechanics on the BC platform. This implies that the processes of token bonding and delegation primarily occur on the BC network, rather than directly on BSC. This design choice is pivotal, as it maintains a seamless bridge with Ethereum, promoting cross-chain functionality and broadening the potential user base.
BNB's stature in the digital space is on the rise, marked by its integration into Plisio payment gateway
Originally conceived for the Binance cryptocurrency exchange, BNB has transcended its initial scope to emerge as a leading medium of exchange on the internet. Its adoption has grown exponentially, extending far beyond dedicated crypto enthusiasts to encompass a wide range of online platforms and services.
Plisio: At the Forefront of BNB Integration
Among the notable platforms capitalizing on BNB's potential is the Plisio crypto payment gateway. Plisio has not just recognized the intrinsic value of BNB but has actively integrated it into its suite of services.
Complimentary BNB Wallet: One of Plisio's standout features is its free BNB cryptocurrency wallet. This offering simplifies the transactional process, providing users with a secure and efficient means to manage their BNB assets.
Extensive Plugin Library: Catering to the diverse needs of the digital ecosystem, Plisio boasts an impressive range of plugins. These are designed to be compatible with various Content Management Systems (CMS), ensuring businesses can effortlessly integrate BNB payments, regardless of their underlying platform.
User-friendly API: Further enhancing its service suite, Plisio offers a streamlined and intuitive API. This tool facilitates seamless integration processes, allowing businesses to easily incorporate BNB-based transactions into their operations.
In conclusion, as BNB continues to solidify its position in the digital payment sector, platforms like Plisio are playing a pivotal role in its broader acceptance and integration. Their comprehensive offerings and tools are not just elevating the BNB experience but are also setting new standards for cryptocurrency-based transactions in the digital space.
Please note that Plisio also offers you:
- Zen Cart
- Easy Digital Downloads
6 libraries for the most popular programming languages
19 cryptocurrencies and 12 blockchains
- Bitcoin (BTC)
- Ethereum (ETH)
- Ethereum Classic (ETC)
- Tron (TRX)
- Litecoin (LTC)
- Dash (DASH)
- DogeCoin (DOGE)
- Zcash (ZEC)
- Bitcoin Cash (BCH)
- Tether (USDT) ERC20 and TRX20 and BEP-20
- Shiba INU (SHIB) ERC-20
- BitTorrent (BTT) TRC-20
- Binance Coin(BNB) BEP-20
- Binance USD (BUSD) BEP-20
- USD Coin (USDC) ERC-20
- TrueUSD (TUSD) ERC-20
- Monero (XMR)