Binance Coin (BNB) Use Cases and Risks

by Nolfator

Lately, BNB (Binance’s native coin) has been making rounds, especially because of the sudden increase in its value, reaching top 5 in market cap rating and controversial nature of the centralization of this crypto coin.

Many people are asking how is it possible that such “useless” centralized coin is currently top 3 in the market cap ranking.

Intro:

BNB powers the Binance Ecosystem and is the native coin of the Binance Chain and the Binance Smart Chain. BNB was launched through an ICO in July 2017, couple of days before the Binance Exchange opened for trading. Total supply of 200 million coins. 100 million BNBs were offered in the ICO. BNB is periodically burned, last burn was in January 2021, of about 3.5 mil coins. Current total supply is 170 mil. https://www.binance.com/en/blog/421499824684901482/14th-BNB-Burn-%7C-Quarterly-Highlights-and-Insights-from-CZ

Initially based on the Ethereum network, the ERC-20 BNB tokens were later swapped with BEP-2 BNB on a 1:1 ratio. The BEP-2 BNB is the native coin of the Binance Chain, and the mainnet launch was announced in April 2019. In September 2020, Binance launched the Binance Smart Chain (BSC), which is a blockchain network that runs in parallel with the Binance Chain, and BNB is present there as BEP-20 token.

Main use cases for BNB:

1. Pay for goods and services all around the world with BNB via Binance card and plus get a cashback in BNB

BNB is included in Binance card payment options. With Binance card you are able to pay online (Amazon, Netflix, Spotify, etc) as well as brick and mortar retail (Tesco, Lidl, etc). Grocery stores, cinemas, gas stations, furniture stores, eshops etc. Everywhere you can pay with standard visa card, you should be able to pay with binance card. And top of that, you get % cashback from pretty much every purchase. You can link binance bard with Curve or Google pay for NFC payments with smartphone, smartwatches, and any other NFC compatible payment gadget. https://www.binance.com/en/support/faq/c93fe535bcf4431aa32623ae0a49d4f2

2. Pay for goods and services all around the world with BNB via Binance Pay

Binance pay is a new service provided by Binance, personally I have not tried it yet, but from the looks of it, its a competitor to Paypal, or maybe Nano?. It allows users and stores to send and receive crypto payments without fees. https://www.binance.com/en/blog/421499824684901777/Binance-Pay-Borderless-Crypto-Payments

3. Reduction of trading fees on Binance exhange

Pretty straightforward, you can opt-in to pay for trading fees with BNB. That will reduce fees by 25%, but only for Binance exchange.

4. Staking

Binance offers BNB staking, flexible or locked, at about 7-20% APY. https://www.binance.com/en/pos https://www.binance.com/en/defi-staking

5. Launchpool New projects can be introduced to crypto market via Binance launchpool. It’s basically staking BNB for farm a new coin/token, before it is tradable. Recently for example: ALICE, DODO, LIT, REEF, UNFI, ALPHA and more. https://launchpad.binance.com/en/viewall/lp

6. Launchpad

Basically you commit certain amount of BNB, and you will be able to get a new token for cheaper price. Recently for example LINA. https://www.binance.com/en/support/faq/9c9c8c38ce384c95a527f19dd30b7464

7. Liquidity pool

You can add BNB to liquidity pools for liquidity swap and earn rewards, similar to LP tokens on defi swaps. https://www.binance.com/en/swap/liquidity

8. Convert “dust” to BNB

If you trade a lot, it happens that in your wallet stays micro amounts of various coins, that you are not able to trade on exchange. I think once per 24 hours you can convert these micro amounts to BNB. This is kinda sketchy, because it is Binances decision that you can’t trade these micro amounts, so they are basically forcing you to convert dust to BNB.

9. Gas fees and trading pairs on Binance smart chain (BSC)

At the end of 2020 Binance launched BSC, which uses as native token BNB. BNB is used as payment for gas for all transactions, and also as trading pair for many tokens.

Why did BNB rise in price?

• We are in bull market. Don’t fool yourself that you are genius investor. Every single coin and token climbed up in price in last 3-4 months.
• Launch of Binance smart chain. Many projects moved over from Ethereum blockchain or new ones started directly on BSC to save on fees (BSC fees are much cheaper, below 1 usd on average)
• Binance is coming up with new uses/services for BNB, so people will be encouraged to hold BNB and use it in Binance ecosystem.
• Growth of Binance exchange. I know that many exchanges washtrade to pump up their trading volume, but really it’s hard to come up with other metric we can rank them on. This is current state from Coingecko: Volume ranking

Binance is about 10x bigger in volume and 8x bigger in visits compared to 2nd most successful exchange. That is a huge difference.

Why not go all in on BNB?

• It is a centralized coin.
• As far as we know, more then half of the supply is in the hands of Binance.
• Completely dependable on Binance exchange. This can be good and a bad thing. If Binance thrives, we can assume BNB will go up. If Binance goes down (crypto crash, hack, government lawsuit, regulations, etc.), so will BNB.
• The more services Binance offers for BNB holders, the easier is for Binance to manipulate the price. They can adjust APY, staking, fees, rewards, anything.
• Binance is becoming world crypto bank. They offer financial services as loans, interest savings, trading, payments. Again, this is good and bad, depends on your point of view. It goes pretty much against everything that is the original vision of cryptocurrency, to ditch banks and become financially independent.

Closing thoughts

BNB is a centralized coin on biggest centralized crypto exchange in the world. And everything that goes with it, the good and the bad.

• If you consider crypto an investment and don’t care about the philosophy, ask yourself – Will Binance, leading exchange with presumably millions of dollars in daily profits, be alive in next couple of years? Will it increase it’s own domination, stagnate, or will other exchanges triumph over it?
• If you are in crypto to unbank yourself, become financially independent of institutions and promote the idea of trustless, decentralized blockchain, ask yourself – Do I want to support company that does pretty much everything the old fiat banks do? Every BNB purchase further legitimizes the point that centralized banking is here to stay. How will that impact the future of crypto?