What is BNB? Should you invest in Binance Coin?

CryptoAZ Source

What is BNB is the core keyword of this guide; we clarify Binance Coin and the BNB Chain basics first.

As you may know, Binance is one of the largest cryptocurrency exchanges in the world today. Binance has a vast ecosystem with more than 1,300 decentralized applications in operation. This ecosystem is built on the BNB blockchain network. So what is BNB? How does it work? Is Binance Coin worth investing in? Let's find out in the article below.

BNB is the coin issued by the Binance cryptocurrency exchange through an ICO in July 2017.

BNB Coin (Binance Source)

Initially, BNB was built on the Ethereum blockchain under the ERC-20 standard. After Binance launched its own blockchain, Binance Chain, in April 2019, BNB became the native coin of Binance Chain and adopted the BEP-2 standard.

Since 2020, BNB has migrated to Binance Smart Chain (BSC) — an Ethereum-like blockchain with faster and cheaper transactions. At this time, BNB is used on BSC following the BEP-20 standard.

In February 2022, with the launch of BNB Chain, BNB officially decoupled from the BSC ecosystem to operate independently on BNB Chain.

In addition, BNB is used within the Binance ecosystem to reduce trading fees for users and to pay gas fees for decentralized finance (DeFi) activities on BNB Chain.

Therefore, it can be said that BNB is the flagship cryptocurrency of Binance, integrated across multiple Binance-developed blockchain ecosystems such as Binance Chain, Binance Smart Chain, and now BNB Chain.

What is the BNB Blockchain?

BNB Blockchain

BNB Blockchain is an independent blockchain infrastructure developed by Binance, launched in February 2022 to optimize and expand Binance's blockchain ecosystem.

Previously, the Binance ecosystem consisted of Binance Chain and Binance Smart Chain (BSC) — two separate blockchains. To maximize the potential of these networks, Binance merged them into the BNB Blockchain.

Specifically, the BNB Blockchain includes two main sub-chains:

BNB Beacon Chain: Handles governance aspects such as validation, staking, and voting.

BNB Smart Chain: Continues to support EVM features for building DeFi, GameFi, and Metaverse applications.

The launch of the BNB Blockchain aims to create a decentralized, scalable ecosystem governed by the community. This is a strategic step by Binance toward building a comprehensive and sustainable Web3 platform.

Key characteristics of BNB Coin

BNB (Binance Coin) is a cryptocurrency developed within the Binance exchange ecosystem and the Binance Smart Chain platform. Notable characteristics include:

Binance ecosystem: BNB is developed by Binance, one of the world's leading cryptocurrency exchanges, creating a strong linkage between BNB and the broader Binance ecosystem.

Blockchains: BNB utilizes two primary blockchains: Binance Chain and Binance Smart Chain. Binance Chain is Binance's own blockchain, while BSC is an Ethereum-compatible network. This combination enables diverse features and applications across both chains.

Consensus: BNB uses a Delegated Byzantine Fault Tolerance (dBFT)-like mechanism for network security and reliability.

Token type: BNB is a utility token. It can be used to pay trading fees on Binance, participate in projects and applications within the Binance ecosystem, and for functions like staking and yield farming.

Supply: BNB has a total supply cap of 200 million tokens.

Block confirmation time: Transactions confirm quickly, around 1 second per block, improving user experience.

Circulating supply: The initial total supply was 200 million, and the current circulating amount is roughly 170 million. Binance regularly burns BNB to reduce supply and enhance long-term value.

BNB formats: BNB exists as BNB BEP-2 on Binance Chain, BNB BEP-20 on BSC, and BNB ERC-20 on Ethereum (historically), enabling broad compatibility.

Coin burns: Binance conducts quarterly BNB burns using 20% of profits until only 100 million BNB remain, potentially increasing scarcity and value over time.

These characteristics have helped BNB become a popular and closely watched cryptocurrency in today's market.

How to acquire BNB

The most common way is to buy BNB directly on reputable exchanges. Users create an account, deposit funds via common payment methods (bank transfer, credit card, e-wallets), then trade BNB using pairs like BNB/USDT or BNB/BTC.

Another way is to join airdrops of projects on BNB Chain or promotional events by Binance. Users register and complete tasks to receive a small amount of free BNB.

BNB can also be obtained by participating early in new token launches on BNB Chain, or via earning methods such as staking and lending.

With these methods, users can safely and easily hold BNB in their wallets for trading and investment purposes.

Should you invest in BNB?

BNB has long-term growth potential thanks to support from Binance, a top global exchange. However, it is still a high-risk investment due to the volatility of the crypto market.

Pros include: strong demand and liquidity from Binance users; regular coin burns that limit supply and may support future price; and growth potential as the ecosystem expands.

Risks include: overall market volatility; competition from other coins; and dependence on Binance's policies.

We recommend diversifying your portfolio, not allocating more than 30% of total capital to BNB, and managing risk with stop-loss levels. Consider long-term investing only if you can tolerate high volatility.

Frequently Asked Questions (FAQ)

What is BNB Coin used for?

Paying trading fees on Binance at discounted rates compared to other cryptos.
Paying fees across the Binance Smart Chain ecosystem; BNB is the default currency for services like staking and lending in DeFi.
Participating in token sales/launches that support BNB to attract the community.
Collateralizing/guaranteeing large digital asset transactions.
Paying within applications built on Binance-related blockchains; usage continues to expand.

What is the difference between BNB and Binance?

BNB refers to the blockchain/network, whereas Binance is a cryptocurrency exchange. Binance is a centralized company operating the world's largest exchange, while BNB Chain is an EVM-compatible Layer 1 network.

Why is BNB strong?

BNB benefits from Binance's backing — a leading global exchange with large trading volumes, which supports strong liquidity.
BNB is used to pay trading fees on Binance with significant discounts, incentivizing users to hold and use BNB.
Periodic BNB burns create scarcity over time, potentially supporting value.
Expanding use cases across the BNB Chain ecosystem further increase BNB's growth potential.
With these advantages, BNB is becoming a reputable crypto asset that can deliver strong investment performance.

Can BNB last long term?

If Binance and BNB Blockchain continue to develop positively, BNB has promising long-term prospects. However, future risks cannot be ruled out.

What is BNB? Should you invest in Binance Coin?