What is Binance Coin? The Beginner’s Guide

Binance is the leading cryptocurrency exchange and Binance Coin is its own cryptocurrency. Binance Coin has been a big hit since its inception, just like the Binance exchange. Nowadays, BNB has also use cases outside the exchange. This is a Binance Coin beginner’s guide.

Binance Coin is created by Binance

Let’s first put Binance Coin to the right place in the crypto universe, so it’s easier to understand the purpose of this coin.

Cryptocurrencies can be placed into three major categories: currencies, platforms, and tokens. The currency category has popular coins such as Bitcoin, Litecoin, and Bitcoin Cash. The purpose of these cryptos is to function as P2P digital cash.

Ethereum and EOS are the most known platform category products. They can be also called ecosystems or operating systems, like iOS and Android. They are platforms for decentralized apps and smart contracts.

Tokens are built on these platforms (mostly on Ethereum) and they have utility inside a specific application. Chainlink and Basic Attention Tokens are probably the best-known examples.

Binance Coin (using the shortcode BNB) was created during the ICO boom of 2017 as a utility token for Binance exchange. It started its life as an ERC20 token inside the Ethereum platform. However, Binance has expanded a lot since its inception and launched its blockchain in 2019.

binance front page july 2020

The front page of in July 2020.

This is the reason Binance Coin isn’t just a utility token anymore, but it has become a proper cryptocurrency in the Binance blockchain. In 2020, Binance also announced the launch of Binance Smart Chain, which is an additional blockchain. Binance Coin will be the digital fuel of BSC as well.

One could say Binance Coin is competing against platform currencies, but it’s still used as a traditional utility token as well.

Next, we’ll go through the history of Binance Coin. Why has it become so popular?

The history of Binance Coin is short but very successful

As mentioned earlier, Binance Coin is created by Binance, which is the leading cryptocurrency exchange. Binance has a very known and popular face: Changpeng Zhao a.k.a CZ”.

Zhao was born in China, but he moved to Vancouver at the end of the 1980s. He attended the McGill University in Montreal and majored in computer science. After this, he worked in Shanghai and Tokyo with different trading platforms.

Binance founder has lots of experience from cryptocurrencies as well. He joined the industry in 2013. Zhao worked for and he was the CTO of OKCoin exchange for several years.

Zhao left his post at OKCoin in 2017 to build Binance. He has told in various interviews that the idea behind Binance was developed for many years. This is the reason Binance was better equipped for the crypto boom of 2017 and didn’t crash constantly like its competitors.

changpeng zhao

Changpeng Zhao in a Bloomberg interview.

Binance organized an ICO in the summer of 2017 and raised 15 million dollars. This is quite a small amount when you compare it to a multi-billion ICO of EOS.

Binance Coin was born as a result of this ICO. It was first launched as an ERC20 token on the Ethereum platform like almost all ICO-born tokens at the time. There were 200 million BNB coins created: 100 million was sold to ICO investors, the Binance team had 80 million and angel investors had 20 million.

Binance exchange opened its doors quickly after the ICO was completed. It gained popularity fast in 2017 and hit the mainstream at the peak of the altcoin bubble. Binance had millions of new customers due to the fact it was the only major exchange functioning properly.

Binance Coin had a clear utility from the beginning: when you hold BNB in your Binance account, you’ll receive a 50% discount on your trading fees.

The success of Binance has been breathtaking. The exchange became the market leader in just six months. Binance became also the fastest unicorn in history. A unicorn means a startup with a billion-dollar valuation.

Binance founder Changpeng Zhao has also become one of the best-known figures in the crypto industry. He is known for his hands-on approach to Binance; Zhao is often the first person to report both good and bad news on Twitter.

CZ even made it to the front page of Forbes in February 2018.

Binance’s success didn’t end when the altcoin bubble crashed, and the long crypto winter of 2018 started. They have kept building and getting new customers, which has also created a demand for Binance Coin. This is the major factor, why BNB held its value better than any other altcoin during the long downtrend of 2018.

In 2019, Binance Coin became the first cryptocurrency to reach new ATH since the previous boom. While BNB was reaching new record valuations, its competitors were still 85-90% down from ATH.

Binance Coin has been a very good investment since its inception.

Blockchains of Binance

When Binance was founded in 2017, it was just an exchange. This changed in 2019 when Binance launched its blockchain. This was not some secret project or a big surprise since Binance mentioned this in the original white paper of Binance Coin.

Binance Chain MainNet was officially launched in April of 2019. After this, a token swap was completed, which meant that all Binance Coins moved from Ethereum blockchain to Binance blockchain. Binance Coin is now a BEP-2 standard coin and no more an ERC20 token.

Binance Chain is a third-generation blockchain, which can match the capacity of EOS, Tron, and other similar platforms. It can reach up to 1000 transactions per second. New blocks are created every second, which makes transactions practically real-time.

The launch of the Binance Chain has also changed the company strategy. Earlier, Binance was just an exchange, but now they are acquiring projects from other blockchains to Binance Chain. This recruiting process has focused especially on the Ethereum blockchain.

Mithril was the first project to move from Ethereum to Binance. There have also been other projects, which have some added benefits when moving to Binance Chain. First, the network capacity is much better. Second, Binance can offer the tokens more visibility in their exchange. This will help to boost the entire project financially.

Binance Chain (BC) was just the beginning. Binance announced in 2020 that it’ll soon launch another blockchain called Binance Smart Chain (BSC). This will be an expansion to the Binance Chain and they will create together a dual-chain ecosystem.

The reason Binance has created BSC is that it wanted to keep BC as simple and robust. If the smart contract support was added to BC, the chain might have lost some critical advantages it now has. Therefore, a new blockchain was created with full smart contract support. Binance Coin will be the native token and virtual gas of both.

Binance Chain technology

All 3rd generation platforms are using a Proof of Stake based consensus. The term “3rd generation” refers to blockchains, which have solved the scalability issues of Bitcoin (1st gen) and Ethereum (2nd gen).

A Proof of Stake consensus algorithm differs greatly from Proof of Work, which is used by Bitcoin and Ethereum. PoS requires no physical mining machines and the blockchain validators are chosen by token stakers.

More cryptocurrency you stake (= lock) to the blockchain, higher voting power you have when it comes to data validation. This is all logical because the users who have the most to lose have the highest incentive to keep everything working correctly as well.

Binance chain is using a Proof of Stake variation called Tendermint BFT. You can find more information on that from this article. The name Tendermint has become quite well-known in 2019 especially due to the Cosmos project. The video below will give you a short introduction.

The blockchain is run by three different nodes: a validator node, a witness node, and an accelerated node.

Validators are the nerve centers of the Binance blockchain. There are only a dozen of them, and each is hand-picked by Binance. This is quite a strong statement against Binance DEX being decentralized as well.

A validator node is validating transactions and collecting transaction fees, which are paid in Binance Coin.

An accelerated node works like a turbo boost:

Accelerated Node is special infrastructure built around Validator to facilitate accelerated transaction routing and provide richer, faster user interfaces. There are always several Accelerated Nodes running at the same time around the world (owned by different organizations) and you are encouraged to choose one of them to use, or allow your Wallet choose one randomly. For rapid API access, you’d better stay with one Accelerated Node to get better performance. (Source)

Witness nodes are like the nodes in the Bitcoin blockchain. Their task is to record the blockchain and pass transactions forward. Witness nodes have no part in block creation.

You can read more of the technical side of the blockchain from Binance’s FAQ.

Binance Smart Chain

Binance Smart Chain (BSC) is the brand new blockchain created by Binance. It’ll be launched in Q3 / 2020. It’s an expansion to the Binance Chain and offers full support for smart contracts and complex Dapps.

The governance model of BSC is also more decentralized. The consensus algorithm is quite similar to the Delegated Proof of Stake (DPoS), which is used by EOS and Tron. In DPoS, there are 21 validators chosen to create blocks and run the network.

Binance Smart Chain works exactly like this. However, Binance is calling its version as Proof of Staked Authority (PoSA). Each Binance Coin holder can participate in a validator election and delegate coins for block rewards.

Perhaps the most important feature is the support for Ethereum Virtual Machine (EVM). This means that Ethereum-based Dapps can be easily moved from Ethereum’s blockchain to Binance Smart Chain. This might have a big impact in the future if Ethereum’s 2.0 version launch is delayed.

In general, BSC is a fully scalable 3rd generation blockchain platform. It will match the capacity of its competitors for sure. The block time will be only around 5 seconds.

binance smart chain vs binance chain

Image: Binance

See the image above for a comparison between BC and BSC. These chains will be communicating with each other seamlessly.

BSC is yet another use case for the Binance Coin. Each validator of the chain will have to stake Binance Coin, which will give BNB a nice staking boost later in 2020. Staking has given many cryptocurrencies a boost of hundreds of percentages in 2019 and 2020.

You can read more about Binance Smart Chain from the white paper.

Binance DEX

The most important application of the Binance Chain is Binance DEX, meaning decentralized exchange. DEX is an alternative to traditional exchanges, so why would Binance develop such a product?

The reason is Chanpeng Zhao’s vision of the future of the cryptocurrency markets. He thinks decentralized exchanges will eventually take over a bigger share from traditional crypto exchanges. This is because more and more people want to trade cryptos P2P without any middlemen.

binance DEX |

The front page of

Binance DEX will strengthen the Binance Coin as well and give more utility to it. Binance Coin functions as “digital gas” and transfers value in the Binance blockchain, just like Ether in Ethereum or EOS tokens in the EOS blockchain.

Binance has also received some critic from their DEX. Many analysts have pointed out, that this is not a decentralized exchange. Two key factors differentiate DEX from a traditional exchange:

  • Users are always in control of their cryptocurrencies
  • The exchange (and its transactions) are not controlled by a third party

Binance DEX fulfills the first condition, but not the second. According to Changpeng Zhao, the word decentralization is seen as too black and white.

“Many people think of decentralization as absolute; you are either decentralized or not. I think that in reality, there is a gradient scale from centralization to decentralized.” (Source)

Binance became quickly the leader of the cryptocurrency exchanges. It’s interesting to see how the Binance DEX will conquer the markets. More success it gets, more utility there is for the Binance Coin as well.

Binance Coin as an investment

Binance Coin has been a great investment for those who found it in 2017 or 2018. It’s also kept the top 10 status well in 2019-2020, even if BNB hasn’t been one of the hottest altcoins lately. It looks much stronger than many other large-cap coins like Litecoin or Bitcoin forks.

Binance is also performing well. It has brought new features to the market constantly, and there is no doubt that Binance is the market leader right now. This should help to keep the demand high for Binance Coin as well. When you also add the Binance DEX, Binance Chain, and Binance Smart Chain, it all looks terrific.

Binance Coin investors will also benefit from coin burning, which is performed quarterly by Binance.binance coin burn

In practice, burning means destroying coins. Binance has announced that it will burn BNB until there are just 100 million of them left. This means, that Binance will destroy 50% of the supply over time.

In Q1 of 2020, Binance burned Binance Coins worth over 52 million dollars. This means that over 10% of the total BNB supply is already been burned.

Many cryptocurrencies have an inflating total supply. For Binance Coin, there is constant deflationary pressure, which is very important in token economics. The laws of supply and demand simply state, that if the demand stays static but supply goes down, the value has no other way but up.

We know that all Binance Coins have been created in the ICO and there won’t be new ones minted.

It’s also important to know, that Binance Launchpad is using BNBs. Launchpad is the IEO platform of Binance, which has become very popular in 2019. You can only participate in IEOs by holding enough Binance Coins.

All this is very good for BNB. The coin has many use cases and deflationary pressure as well.

Binance Coin price and How to buy Binance Coin

If you want to invest in Binance Coin, you’d buy it from Binance (Note for US citizen: you have to use the Binance US). Binance Coin can be bought with fiat currencies, Bitcoin, Ethereum, and many stablecoins.

If you want to convert your fiat money to Binance Coin, you can make a direct bank deposit or credit card deposit to Binance and purchase BNB.

Even if Binance is the leading exchange and probably one of the safest out there, it’s always recommended to store your cryptocurrency to an external wallet for the long-term.

Ledger Nano X, Ledger Nano S, and Trezor support Binance Coins and offer ultimate safety. You can also use Exodus wallet (desktop & mobile) or TrustWallet on mobile.

Follow Binance exchange @binance, Changpeng Zhao, @cz_binance and Binance DEX @binance_DEX. On Twitter. Reddit threads can be found at /r/binance and /r/BinanceExchange.

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