The largest cryptocurrency exchange in the world, Binance, launched its platform coin: Binance Coin (BNB). This is also one of the most popular cryptocurrencies in the market today. This article will introduce the functions of Binance Coin, future plans for BNB, etc., for readers who want to understand the cryptocurrency market.
However, please note that this article introduces mechanisms related to BNB and does not constitute an investment recommendation. The content only organizes information from Binance's official website, and investors should be aware of volatility risks.
What is BNB (Binance Coin)? Development history and functions
Functions of Binance Coin (BNB)
The symbol for Binance Coin is $BNB, a cryptocurrency launched by Binance and also a type of 'platform coin'.
Since Binance Coin is launched by the exchange, it is tied to many of the exchange's functions, such as transaction fee discounts and airdrop activities, which will be described below.
Additionally, Binance Coin is also the native token of the Binance Smart Chain (also known as BNB Chain, BEP20, BSC), so if you want to interact with this chain, whether for transfers or operating DApps, you also need to hold BNB as fuel (gas fee).
Therefore, BNB has two properties: platform coin and native token of the chain.
History of Binance Coin (BNB)
Binance Coin was issued in June 2017, with the issuance price being 1 ETH for 2,700 BNB and 1 BTC for 20,000 Binance Coins.
Currently, Binance Coin ranks fifth in terms of market value in the cryptocurrency market.
Mainstream centralized exchanges and decentralized exchanges can also buy BNB, making it a highly liquid token.
Uses of Binance Coin: Exchange airdrops, native token of the chain
Transaction fee discounts at Binance Exchange
Since BNB is a token issued by Binance, it naturally has some mechanisms on the exchange.
One of them is the transaction fee discount. Holding BNB can make you a VIP at the exchange, with different tiers of transaction fees. For a detailed explanation of Binance fees, see: Complete explanation of Binance fees: how to calculate, fee discount strategies, how to check.
Tutorial on using BNB to offset transaction fees
If you hold BNB (Binance Coin) and enable 'Fee' > 'Pay transaction fees with BNB' in the trading interface, you can receive a 25% discount on transaction fees.
Moreover, this BNB fee reduction can be used together with the site's referral code discount, so the final fee rate is as follows:
In simple terms, through the site's referral code, spot trading fees are discounted by 20%, and contract trading fees are further discounted by 75% using BNB, allowing you to save a total of 0.8 * 0.75 = 0.6, which means a 40% discount on transaction fees.
This is already the highest fee reduction technique on the internet, and it applies to general users.
Airdrops available to BNB holders
The term 'airdrop' refers to 'tokens dropped from the sky,' similar to the idea of distributing benefits.
To reward BNB holders, Binance has launched many airdrop activities, each with different participation methods.
Currently, BNB holders can receive the following three types of airdrops:
Launchpool new coin mining: Binance will periodically launch Launchpool activities, during which, as long as you hold BNB, Binance will distribute tokens to you in proportion to the amount you hold.
HODLer airdrop: HODLer airdrops are distributed through a 'snapshot' mechanism, so Binance may suddenly announce on a certain day that those who held BNB in the past few days will receive an airdrop, and those who buy after seeing the announcement will be too late.
HODLer does not announce in advance when to hold BNB to receive an airdrop; the goal is to encourage long-term holding rather than buying BNB only at the start of the activity.Megadrop: Megadrop is a marketing activity combining BNB with the Binance Web3 wallet, usually requiring you to use the Binance wallet to complete tasks to earn points, and then based on the amount of BNB you hold and the fixed deposit period, you earn additional points; total points determine the amount of airdrop you receive.
In simple terms, holding BNB allows you to receive three types of new coin airdrops, but the participation methods differ: some require only holding (Launchpool), others require 'prior holding' (HODLer), and others require completing tasks and making fixed deposits (Megadrop).
BNB is the native token of the Binance Smart Chain
In addition to transaction fee discounts and airdrop activities, BNB is also the native token of the Binance Smart Chain.
Binance Smart Chain (BSC), also known as BEP20, BNB Chain, is a parallel chain developed by Binance, where transfers, contract interactions, etc., can occur.
For example, if you want to transfer from another exchange (like MAX) to Binance, you can do it through BSC. To operate BSC, you need to have BNB as fuel.
Therefore, it can be imagined that BNB is the infrastructure for the operation of the BSC blockchain; the more prosperous BSC develops, the higher the demand for BNB.
Is it worth participating in Binance Coin's financial activities: current, fixed deposits?
If you hold BNB, you can also invest it in Binance's fixed-term products, but the interest rate is not high, usually below 1%.
Putting BNB into fixed-term products mainly focuses on the previously mentioned airdrop activities rather than the interest.
According to the data at the time of writing, the interest rate for BNB current deposits is 0.2%, but the interest rate for 120-day fixed deposits is only 0.4%, not far apart.
Moreover, BNB is not low risk; the terms 'current, fixed deposits' should not be viewed as similar products to banks. The risks associated with Binance Coin will be mentioned below.
Burn mechanism of Binance Coin
Binance Coin is designed with a burn mechanism, where the so-called burn refers to the act of the cryptocurrency exchange repurchasing BNB from the market and destroying it to reduce supply.
Currently, there are two destruction mechanisms for BNB: quarterly burns and burning some BNB used as fuel fees on the Binance Smart Chain (BSC). Detailed records can be referenced on the official website.
Risks of Binance Coin: High-risk cryptocurrency investors should be cautious
Binance Coin (BNB) is indeed a cryptocurrency, so despite the various benefits mentioned above, its price volatility is still significant.
During the Launchpool mining period, BNB is more likely to experience significant price volatility because many people will buy coins specifically to participate in the activities and sell them right before the end of the activity.
This volatility makes BNB a high-risk cryptocurrency, similar to BTC, ETH, and others.
Here are some examples; please note that the following are only examples to illustrate the volatility characteristics of BNB and should not be considered references for future investments.
In the past year, BNB rose from $354 to $649, an increase of 83%; however, there were frequent drops of 20-30% during this period, indicating significant volatility:
Moreover, due to the high binding of Binance Coin with the Binance Exchange, if there are any issues with the exchange, BNB may also experience significant volatility, which is inherent to platform coins.
For example, the once second-largest exchange, FTX, also launched a platform coin, FTT, which peaked at around $73 but is currently about $2, reflecting a 97% drop, showcasing the close binding between platform coins and their exchange.
Although BNB is also the native token of the BSC chain, if Binance encounters issues or shuts down, relying solely on the operation of BSC may not compensate for the significant negative impact caused by problems at Binance Exchange. Therefore, the risks of Binance Exchange are also the risks for BNB holders.
Ways to invest in Binance Coin
Binance Coin (BNB), like other cryptocurrencies, can be purchased through normal purchasing channels. Currently, mainstream exchanges including Binance, ByBit, OKX, etc., have both spot and contract trading for BNB.
In decentralized exchanges like Uniswap, PancakeSwap, etc., there are also BNB spot and derivatives available for purchase.
However, it is still important to note that regardless of any platform or product, purchasing BNB or other cryptocurrencies is a high-risk investment, and caution should be exercised.
