The Complete Guide to Understand the Foundation of What Binance Is

Several projects and assets in the bitcoin and blockchain industries are aimed toward diverse aims. It's not uncommon to see programs that try to address similar problems.

For example, there are several cryptocurrency exchanges. Even though each exchange's structure and functionality differ, they all attempt to provide crypto traders a venue to trade their assets in a larger sense. A cryptocurrency exchange may have an asset utilized for specific purposes, such as trading platform fee discounts on its connected exchange.

The Binance exchange's Binance Coin (BNB) is one such crypto exchange asset.

In this tutorial on ‘What is Binance’, you will explore its in-depth concepts and components in detail.

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What Is Binance (BNB) Coin?

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  • On the Binance cryptocurrency exchange, Binance Coin (BNB) is a cryptocurrency that may be used for trading and paying commissions.
  • With more than 1.4 million transactions per second as of January 2018, one of the biggest cryptocurrency exchanges in the world was the Binance Exchange.
  • This coin is limited to 200 million BNB tokens and runs on the Ethereum blockchain using the standard ERC 20 protocol. 
  • As an incentive, Binance Coin users receive a reduction in transaction costs on the Binance Exchange. 
  • BNB can be traded or exchanged for other cryptocurrencies like Bitcoin, Ethereum, Litecoin, and others.

How Does Binance Coin Work?

  • Like other digital assets available on the market, the value of BNB changes as people use and trade it.
  • BNB can be kept in suitable wallets purchased from cryptocurrency exchanges and delivered straight to others for payment or other uses. But there is a whole working initiative behind this process.
  • Binance's layer-1 blockchain is merged to form the BNB Chain, previously the Binance Smart Chain and the Binance Chain.

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  • Binance designed the blockchain for best performance when it comes to trading on-chain when building the BNB chain, and Binance DEX, Binance's decentralized exchange (DEX), is based on this newly developed chain.
  • Furthermore, BNB chain transactions are powered by the BNB gas token, which stands for "Build and Build" (previously known as Binance Coin).
  • BNB beacon chain and BNB Smart Chain make up the BNB chain. 
  • The former concerns BNB Chain governance, allowing BNB holders to vote and stake their coins. 
  • Then, it's a consensus layer that's compatible with the Ethereum Virtual Machine and has multi-chain hubs.

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BNB Burn

  • Binance uses 20% of its quarterly profits to buy back and burn Binance Coins, completely destroying them. 
  • Binance has consistently performed quarterly burns, the most recent being on January 24, 2022, which was the 18th quarterly burn.

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  • Every quarter, Binance will continue to burn BNB coin tokens until it has acquired and destroyed 100 million BNB coins, or half of the supply. 
  • Binance Coin's supply is reduced because of the procedure, and its rarity is affected, which could affect the asset's value.

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  • The BNB Pioneer Burn Program is another program offered by Binance. It assesses cases when BNB holders have unrecoverably lost BNB and compensate them by reducing the amount from the next BNB burn.

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Uses of Binance Coin

  • Trading - Binance Coin can be exchanged for other cryptocurrencies on various exchanges, depending on the exchange's regulations.
  • Transaction fees on the Binance Exchange - Users can use BNB to pay for transactions on the Binance Exchange and earn a discount.
  • Credit Card Payments - On Crypto.com, BNB can be used to pay crypto credit card bills.
  • Payment Processing - Merchants can accept BNB as a form of payment, giving customers more options in terms of payment methods.
  • Booking Travel Arrangements - BNB can also be used to book hotels and flights on certain websites.
  • Entertainment - BNB is used for various purposes in the entertainment industry, from paying for virtual gifts to purchasing lottery tickets.
  • Investment - Binance Coin can be used to invest in stocks, ETFs, and other assets on various platforms.
  • Loans and Transfers - BNB can be used as collateral for loans on some platforms. Some apps let users pay friends and family and divide costs using Binance Coin.

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Benefits of Binance

1. Quick Transactions

  • BNB gives you access to the platform's in-house matching engine, which can process up to 1.4 million orders per second when you trade on the exchange. 
  • Finding the appropriate transaction is always possible, and BNB makes it even easier and more reliable.

2. Secure and Trustworthy

  • Binance already has millions of cryptocurrency users and dealers who rely on the platform and believe in the security and protection aspects of the exchange. 
  • The exchange uses a multi-cluster and multi-tier system framework and the Secure Assets Fund for Users (SAFU) to keep your funds safe.

3. Trade Multiple Cryptocurrencies

  • Thanks to a rapid, secure, and low-cost transaction matching technology, you can trade more than 150 cryptocurrencies on the exchange with BNB. 
  • Aside from that, BNB has its own trading pairs to fulfill your individual trading needs. There's no need to seek elsewhere.

4. Trading Discount

  • Using BNB, you can also get a 50% discount on your trading charge. 
  • With traditional payment methods, if you buy $10,000 worth of coins, you'll be charged $10. If you use BNB, though, the trading charge is cut in half, so you'll just have to spend $5.

5. Spending Binance Coin

  • You can utilize BNB in various ways, in addition to having a smooth experience within the Binance ecosystem and receiving transaction fee discounts. 
  • Several service providers accept it, particularly in the travel and hotel industries. Using BNB, you can purchase dinner or a new home.

6. Participate in ICOs/IEOs

  • Binance Launchpad also offers new token sales, where you may buy a share in a new and future currency with your BNB tokens.
  •  These different digital currencies will eventually be introduced to the Binance exchange, where you can trade them as well, giving a comprehensive and seamless experience.

Factors to Consider Before Investing in Binance Coin

  • Investing in some of the ICOs listed on Binance's Launchpad platform is possible using Binance tokens.
  • The Binance exchange will release new cryptocurrencies, and the use of Binance coins will offer a convenient trading platform for various virtual tokens.
  • Binance will eventually be the main currency of the decentralized Binance exchange.
  • The VISA debit card of Monaco, the world's first payments and cryptocurrency platform, and the platform's mobile app all support the Binance coin.

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BNB Pricing and Dynamics

BNB's price has traditionally varied similarly to that of other crypto assets traded on the market. Binance Coin's market capitalization has increased over time, topping $70 billion. BNB was sold for around $0.10 per token during Binance's ICO.

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  • Today, The current value of BNB is 222.72 dollars, with a market capitalization of 36,724,420,112 dollars.

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  • BNB has seen a tremendous increase in value since its ICO, reaching a high of more than $600 per coin at times. 

But Is It Wise to Invest in Binance Coin?

Well, If purchasers joined and sold at the right times, it's conceivable that its past price growth resulted in profit. However, only time can tell where the price of BNB will go in the future.

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Conclusion

In this tutorial, you learned about Binance and its concepts like ‘What is Bianace’, BNB Coin, and how it works. You explored BNB Burn and what are the factors to consider before investing in Binance.

Whether you're an experienced Blockchain developer or just aspiring to break into this exciting industry to know more about Cryptocurrencies and Blockchain, enrolling in Simplilearn’s Blockchain Certification Training program helps you with all levels of experience to learn more about cryptocurrencies like Binance and others, Blockchain, and its technology.

Do you have any questions for us? Please feel free to drop them in the comments section of this tutorial; our experts will get back to you as soon as possible.

About the Author

Shyamli JhaShyamli Jha

Shyamli is a Senior Research Analyst at Simplilearn. She is proficient in Blockchain and Cryptocurrency, Cloud Computing, Android Development and other coding languages like C, C++ and Java.

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