Introduction of Binance Coin (BNB)

WHAT IS BINANCE COIN?

Whenever cryptocurrency exchanges issue their own coins, some people will be wary. After all, such currencies can only be traded on the main exchange, which makes them seem prone to market manipulation. In the case of Binance Coin, things appear to be looking pretty good. It is an interesting cryptocurrency in its own right, especially because it has surged in value by so much.

Binance is one of the top cryptocurrency exchanges, headed by Changpeng Zhao and a team distributed around the world. It has all of the main features you want to see in an exchange like support for trading pairs with all of the major coins (BTC, ETH, LTC, NEO), multiple languages, multiple device platforms, clean user interface, and importantly, extremely high throughput from its order matching engine of up to 1,400,000 orders per second.

Binance does not provide fiat (eg. US dollars) to cryptocurrency exchange, rather focuses purely on crypto-to-crypto. It emphasizes security, speed, and customer service above all else.

Pros

Speed – If you’ve used other exchanges before, you can definitely feel the difference in execution speed. The engine underlying Binance in fact is already powering 30+ other exchanges in Asia.

Team & Partnerships – Binance’s CEO is Changpeng Zhao, who has a deep background in finance, trading, and blockchain technology. He is also the founder of BijieTech (company behind the underlying execution engine) as well as a co-founder of OKCoin (one of the largest Bitcoin exchanges in the world). The CMO is Yi He, one of the leading cryptocurrency experts in China and also a co-founder of OKCoin. They have a close partnership with the most promising blockchain protocol out of China, NEO smart economy (guide to buying NEO), headed by Da Hongfei (in fact, Binance offers fee-free withdrawal of NEO and GAS). Overall very strong team.

Binance Coin (BNB) – Owners of BNB will receive discounts on all trading fees (50% for the first year). See the complete fee structure. In addition, all ICOs offered on Binance will have a discount for using BNB to invest, and the long term promise is owning a stake of a future fully decentralized exchange that rumors have is already in the works. There will be natural deflation as every quarter, Binance will use 20% of profits to buy back BNB and destroy them, thereby steadily driving up the price (up to 50% of all BNB in circulation).

Binance Coins are very compelling and is the primary reason we are here speculating on BNB.

Cons

Limited Coins – Compared to other top exchanges, Binance offers a relatively limited selection of coins to trade – if you want to get anything outside of their supported list, then you will have to go elsewhere. This list will continue to expand (OAX, DNT, MCO, ICN) however and will not be a con for long. In Sep 2017, Binance added a Community Coin per Month program where the coin with the most number of community votes will be listed.

Limited Documentation – Binance is natively Chinese; this means that by default, documentation will start in Chinese and suffer from translation differences for other languages like English.

No fiat currency exchange – Like we mentioned above, you can only use crypto for trading on Binance, as fiat exchanges have much more regulatory scrutiny.

WHY DOES BINANCE NEED ITS OWN COIN?

That is always the main question to ask when exchanges decide to make moves like this. Native exchange-traded currencies which can’t be exchanged anywhere else also make for an interesting discussion. Binance, one of the world’s biggest cryptocurrency exchanges to date, decided to issue 197,192,382 BNB in total, even though only 99,014,000 are in circulation at present. This currency is used to pay expenses on the trading platform. Additionally, Binance offers users a rebate when charges are paid in BNB rather than Bitcoin.

IS THERE ANY REASON TO VALUE BINANCE COIN SO HIGH?

While it sounds convenient to use Binance Coin as a way to pay expenses on the trading platform, the currency is currently valued at over $12. That seems like quite a steep value for an ERC20 token with only one specific purpose. It’s good to have a currency to pay for most expenses rather than be forced to deduct them from your trading balance. Users who do not use their BNB for this purpose can always sell it to other users of the exchange. Whether or not that is enough to warrant a $12 valuation per coin is still a bit unclear.

Furthermore, it seems Binance will continue to buy back BNB later this year. Although not too many details have been made public, it is expected there will only be 100 million coins left in total. This seems to indicate the total supply will be cut in half very soon. The purchased coins will be burned, rather than held by the team. It is an interesting plan, but it would also explain the high valuation associated with BNB right now.

Given the current popularity of the Binance exchange, it seems fair to assume that plenty of users rely on BNB to pay for most trading expenses. As its popularity continues to rise, even more people will learn about BNB and its value, and it is unclear if that will spark more interest in this particular currency. So far, it seems the interest in BNB is warranted, although its use cases are still very limited in nature.

IS THERE A FUTURE FOR BINANCE COIN?

Assuming the aforementioned buyback occurs, it is evident there is good reason to be interested in this particular ERC20 token. Since Binance offers a fair amount of cryptocurrencies to trade, settling fees in a completely different currency is an option well worth checking out. Storing the currency can only be done on the exchange itself, which may make it less appealing to some users. It will be very interesting to see what the future holds for Binance and its native currency.

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