The biggest crypto exchange by far is Binance, with $63bn daily volume across 1214 spot markets and $101bn daily volume in 146 derivatives markets. For reference, that’s about 7x more in daily volume than Coinbase, the next biggest exchange on the list of crypto exchanges. As you might know, crypto exchanges charge fees for executing trades and withdrawals, and one of the reasons why Binance rose to fame so quickly was because of the low transaction fees.
From the start, BNB was envisioned as a key component of the Binance Universe that would rise in value in tandem with the growth of the exchange.
Binance Coin (BNB) was originally launched as an ERC20 token as part of the ICO for the Binance exchange in 2017. It was specifically stated that BNB did not give buyers exposure to the growth of company directly but could rather be used as a utility token. All 200 million BNB tokens were created prior to the ICO, and 100 million were sold to the public, raising approximately $15 million.
The funds raised were used in three different ways: 35% of the funds were used to build the Binance platform and perform system upgrades; 50% were used for Binance branding and marketing; and 15% were reserved as emergency funds.
Eventually, BNB was moved from Ethereum to a custom blockchain called Binance Chain. Binance Chain utilizes the Tendermint byzantine-fault-tolerant (BFT) consensus mechanism. This mechanism involves several different types of nodes: validator nodes who vote to validate transactions; witness nodes that oversee the consensus process and broadcast transactions to other nodes in the network; and accelerator nodes owned by organizations that speed up the validation process.
In order to combat the depreciation of value that will happen with the yearly decreasing discount, Binance burns BNB each quarter based on its trading volumes of the previous quarter. The plan is to burn half of the total supply over time to stabilize the price of BNB.
The utility of BNB
Like AAB, BNB is a native exchange token which can be used for a variety of things, but the most common utility is to further reduce those already-low trading fees by 25%. Simply by holding BNB in your Binance trading wallet, you can pay for the trading fees using BNB and get the discount. For example, if you’re in the VIP 0 Tier trading below 50 BTC over 30 days, a $1000 transaction would cost you $1. Paying for the fee with BNB means you only pay $0.75 cents.
But there is more to the BNB coin than just reduced trading fees. The coin native to the Binance blockchain offers lightning-fast transactions, can be used to buy and sell a large selection of other coins, enables participation in the Binance Launchpad, provides liquidity on Binance Liquid Swap, and it’s even accepted by some merchants and service providers in the travel industry.
The continued rise of BNB
As you can see, from the beginning the native exchange token has been designed in such a way that its usage increases as the activity and customer base on Binance exchange expand. The more people trade on Binance, the more users end up buying BNB to receive discounts on transaction fees, which are then spent and will be bought again by other traders, taking the price higher and higher in the process.
The fundamentals of a utility token embedded in the world’s largest crypto exchange to such an extensive degree have certainly played a large role in the coins recent price rally. Up until 2021, BNB was mostly trading in the $10 to $45 band. That all changed in January 2021 when the coin set charts aflame as it set off for the moon and beyond. Late February BNB was trading at $317, reaching $596 in April. As of writing, BNB is trading at $637. That’s a 3745% rise over the last year, and a 798% gain in just the last 3 months.