How Binance Coin Works?
Decentralization is at the heart of all the upsides blockchain technology can offer. Every single app built on a blockchain platform can be decentralized. So, it’s no wonder that crypto exchanges jumped on the bandwagon to launch their own decentralized exchange (DEX) with no middle man, just traders exchanging and swapping tokens.
Binance is one of those exchanges and in fact, it is the biggest crypto exchange in the world, facilitating more than 1.4 million transactions a second. With time, Binance issued its own cryptocurrency, Binance Coin (BNB) on the Binance Smart Chain (BSC). But, if you are asking, what is Binance Coin? How Binance Coin works? We are about to explain it all.
What is Binance Coin?
Binance Coin or BNB is the native coin of BSC and it is required to make payments for on-chain activities such as making a transaction or using the Binance DEX. Its primary objective is to power the exchange operations and offer convenience and affordability to its users. Launched in July 2017, an Initial Coin Offering (ICO) of 200 million tokens was offered, out of which 20 million BNB tokens were for angel investors, 80 million for project contributors, and 100 million were for ICO participants. The money raised by the ICO was used for the development, branding, and marketing of the exchange.
Connecting your Binance Smart Chain Address to ZenLedger For Your Crypto Tax Forms
- To import your Binance Smart Chain transactions into ZenLedger for your crypto tax forms, all we need is your public address.
- Select the proper blockchain or wallet from the dropdown list.
- Paste your address into the address field in ZenLedger.
- Select if the wallet is based in the USA or not.
- Then hit the ADD COIN button.
How Binance Coin Works?
BNB initially ran on the Ethereum network with the ERC 20 standard but it is now the native coin of its own blockchain, the BSC. It fuels the cryptocurrency platform and its operations to create a sustainable ecosystem. The BSC uses a proof-of-stake authority (PoSA) consensus mechanism and every 24 hours top 21 users who have staked the largest amount of BNB are chosen to validate blocks on the network for a day.
However, BNB is not mineable as it has been pre-mined and allocated through ICO. The tokens in circulation are used on the Binance exchange for discounted trading and also for paying the exchange fee, listing fee, trading fee, and other charges that may occur on the exchange.
The discount rate for the first year was 50 percent but the discount rates are scheduled to be halved every year after that. By the fifth year, discounts will not be available as it affects the value of the token.
BNB can also be utilized for initial exchange offering (IEO) investments listed on Binance’s Launchpad section. When new cryptocurrencies are listed on the Binance crypto exchange for trading, they can be bought with BNB. With a native currency, the exchange doesn’t have to rely on traditional money reducing delays and extra charges which puts a burden on the end-user. BNB offers a seamless experience by helping users save money on trades and that’s how Binance coin works.
Binance Coin Burning
Binance has been continually buying back tokens and burning them to reduce the supply as the exchange plans to erase half of the tokens in circulation. To do this, Binance leverages one-fifth of its profits to buy back the tokens every quarter and destroy them permanently. It is a regular event for Binance and recently the exchange implemented the auto-burn system. On January 17, 2022, Binance had the 18th burn where it burned over 1.6 million BNB tokens estimated to be worth approx. $800 million.
Binance Coin Uses and Support
The coin has several uses such as a mode of payment for transaction fees on Binance DEX, binance.com, and Binance Chain. Other than that, it can be used as:
- A mode of payments at other crypto exchanges such as crypto.com
- A mode of payments at blockchain networks such as Monetha
- Book travel accommodations at sites such as Travel.com, TravelBit, Trip.io
- To buy virtual gifts, lotteries, and card packs
- To pay for online services such as Canva, BitTorrent, and Storm
- Take out a loan at ETHLend
- Make investment at Moeda
Steps to Buy Binance Coin
If you want to buy Binance Coins, you can buy them at, yes you guessed it, Binance! Below are the steps to buy them:
Step 1: Open an Online Account
If you are a U.S. resident, you can buy them from Binance but if you are not then you have to use a VPN to sign up for a Binance.us account and comply with their KYC standards. This means you have to upload your driver’s license, Social Security Number, and biometric information for identity confirmation.
Step 2: Buy a Wallet (Optional)
After setting up your Binance account, you can buy a wallet to store BNB safely. Binance wallet is ideal if you want to transact in BNB frequently but if you want to hold it for a long time, you can either buy hardware or a software wallet.
Step 3: Make your Purchase
Now that your account and wallet are all set up, you can search for the coin on the exchange and make the purchase. After the purchase, store your tokens safely in your wallet.
BNB has garnered support from partnerships which has helped its widespread adoption. One of their partners is Uplive, Asia’s leading live video streaming platform. Uplive has more than 20 million users and the platform sells virtual gifts in exchange for BNB tokens. Another partnership that supports Binance coin is the VISA debit card of Monaco, a leading payments platform.