What is BNB coin: One of the most important altcoins!

Paul Sazan
| Editor:
April 9, 2024
8 min read

Understanding BNB

As you journey into the world of cryptocurrency, it is essential to understand the various types of crypto assets available. This article aims to answer the question, "what is BNB?" and shed light on its origin, development, and role in the Binance ecosystem.

Origin and Development of BNB

BNB, short for Binance Coin, is the native cryptocurrency of Binance, one of the largest cryptocurrency exchanges globally. Binance Coin (BNB) is a cryptocurrency token created by Binance in 2017.

This token was initially launched on the Ethereum blockchain but later moved to Binance's proprietary blockchain, Binance Chain. The main aim behind the creation of BNB was to provide a convenient mode of payment for transaction fees on the Binance exchange. Over time, as the Binance ecosystem expanded, so did the use cases and value of BNB.

BNB's Role in Binance Ecosystem

BNB plays a crucial role in the Binance ecosystem. It can be used for various purposes on the Binance platform, including paying for transaction fees, participating in token sales, and accessing advanced features.

When users pay transaction fees with BNB, they typically receive a discount, which has made BNB a popular choice among Binance users. Additionally, Binance occasionally conducts token sales through its Launchpad platform, where participation is possible only using BNB.

Furthermore, BNB is also instrumental in the Binance Smart Chain, Binance's blockchain platform. The Smart Chain supports smart contracts and powers many decentralized applications, with BNB being used for transaction fees and governance voting on this chain.

The versatility of BNB within the Binance ecosystem has contributed to its popularity and value growth. As Binance continues to expand and introduce new features and services, the relevance of BNB is likely to continue increasing.

To learn more about the broader crypto ecosystem, including comparing different exchanges like Binance vs Coinbase or understanding other crypto assets like Solana, check out our comprehensive guides and articles.

Key Features of BNB

Image source:

Understanding 'what is BNB' involves delving into the key features that define this cryptocurrency. BNB has several unique attributes that distinguish it from other digital assets, including its maximum supply, token burn mechanism, and the Binance Chain and Binance Smart Chain networks.

BNB's Maximum Supply

BNB's total supply is capped at 200 million coins, according to Binance. This limited supply creates scarcity, a factor that could potentially drive up the value of BNB over time. As an investor, understanding a cryptocurrency's supply limit can offer insight into its potential future value.

Token Burn Mechanism

One of the unique aspects of BNB is its token burn mechanism. Binance periodically uses a portion of its profits to buy back and burn BNB tokens, effectively reducing the total supply over time. By decreasing the supply, the value of remaining BNB tokens could increase due to the principles of supply and demand, making this feature a significant part of BNB's investment appeal.

Binance Chain and Binance Smart Chain

BNB operates on the Binance Chain, a blockchain platform developed by Binance. However, Binance has also developed the Binance Smart Chain, a parallel blockchain network that offers additional features and compatibility with smart contracts.

The Binance Smart Chain allows developers to create decentralized applications (dApps) and execute smart contracts, enhancing the functionality and utility of BNB. For guidance on how to integrate Binance Smart Chain into your wallet, refer to our guide on how to add Binance Smart Chain to MetaMask.

Understanding these key features of BNB can help you make informed decisions when considering this cryptocurrency as part of your portfolio. As with any investment, it's essential to thoroughly research and understand the asset.

Using BNB

In the world of cryptocurrency, BNB is not just another coin to invest in. It serves as a utility token within the Binance ecosystem, offering holders a variety of benefits and uses. This section delves into how BNB can be used, including transaction fee discounts, participation in token sales, and access to advanced features.

Transaction Fee Discounts

One of the key use cases for BNB is paying for transaction fees on the Binance platform. Users who choose to pay their transaction fees with BNB are offered a significant discount, making it a cost-effective option for frequent traders. This incentive is one of the ways Binance encourages the use and circulation of BNB within its ecosystem.

As a BNB holder, you can set your account to automatically use BNB to cover transaction fees. Each time a fee is due, the corresponding amount of BNB is deducted from your account balance. So, if you're an active trader, the more BNB you hold, the more you could save on transaction fees.

Participating in Token Sales

Another use case for BNB is participating in token sales. Binance regularly hosts token sales on its platform, allowing users to purchase new cryptocurrencies before they're listed on the open market. These sales typically take place on Binance's Launchpad, and BNB is often required to participate.

By holding BNB, users can gain the opportunity to invest in promising new cryptocurrencies before they hit the market. This can potentially result in significant returns if the token's value increases after the sale. However, like all investments, participating in token sales also carries risk, and it's important to do thorough research before investing.

Accessing Advanced Features

Holding BNB also gives users access to advanced features on the Binance platform. These can range from enhanced trading features to early access to new services. For instance, BNB holders can enter into token sales, take part in staking programs, and more.

In summary, BNB can be used as a utility token on the Binance platform, offering benefits such as reduced trading fees, participation in token sales, and access to other features and services. For those regularly using the Binance platform, holding BNB can provide significant benefits and opportunities. Remember to always consider your personal investment goals and risk tolerance when investing in any cryptocurrency.

For more information about the Binance platform and other cryptocurrencies, consider reading our comparison of Binance vs Coinbase or our guide on what is MATIC.

Investing in BNB

As part of your exploration into the world of cryptocurrency, understanding what BNB is can be an important step. Besides its various uses within the Binance ecosystem, BNB also represents an investment opportunity for those interested in expanding their crypto portfolio.

Market Performance of BNB

Since its launch in an Initial Coin Offering (ICO) in July 2017, where it raised $15 million in funding.

BNB's increasing value over the years can be attributed to several factors, including its utility within the Binance platform, the burn mechanism that decreases its supply over time, and the growth and success of Binance as a leading cryptocurrency exchange.

How and Where to Buy BNB

BNB can be purchased on various cryptocurrency exchanges, including Binance itself. Given that BNB is used as a utility token on the Binance platform for benefits such as reduced trading fees and participation in token sales, purchasing BNB directly from Binance can often be the most straightforward method.

To purchase BNB, you'll need to set up an account on a cryptocurrency exchange that supports BNB, deposit funds (either crypto or fiat, depending on the platform), and then make a purchase order for BNB.

Remember to consider the security of the platform, the fees associated with trading and withdrawing funds, and the ease of use when choosing an exchange. For a more detailed comparison of popular platforms, check out our article on Binance US vs Binance.

Risks and Rewards of BNB Investment

Investing in BNB, like any other cryptocurrency, comes with its own set of risks and rewards. On one hand, BNB's utility within the Binance ecosystem, combined with the token burn mechanism that increases its scarcity, could potentially drive up its value over time. Moreover, the success and growth of Binance as a leading crypto exchange could also contribute to the appreciation of BNB's value.

On the other hand, as with any investment, there's always the risk of losing the invested capital. The value of BNB (and cryptocurrencies in general) can be volatile, and it's influenced by a variety of factors including market demand, overall sentiment in the crypto market, regulatory news, and more.

Therefore, it's crucial to do your own research, understand your risk tolerance, and consider your financial goals before investing in BNB or any other cryptocurrency. Diversification, or spreading investments across various assets, can also be a good strategy to manage risk.

Expanding Your Crypto Portfolio

While understanding 'what is BNB' and its role in the crypto ecosystem is crucial, a well-diversified crypto portfolio often involves more than just one digital asset. From Bitcoin and Ethereum to newer tokens like Solana or Matic, there are various cryptocurrencies that investors can consider.

Other Cryptocurrencies on Binance

Apart from BNB, the Binance platform offers a wealth of other cryptocurrencies for users to explore. These include major cryptocurrencies like Bitcoin, Bitcoin Cash, and Ethereum, each with its own unique features, benefits, and potential returns.

However, Binance also provides access to a range of altcoins or alternative cryptocurrencies.

Diversifying with BNB and Other Coins

When investing in cryptocurrencies, diversification is key. Holding a variety of coins can help to spread risk and potentially increase the chances of achieving higher returns. BNB, with its utility within the Binance ecosystem and its performance in the crypto market, can be a valuable addition to any portfolio.

However, it's crucial to balance investments in BNB with other cryptocurrencies. For instance, Bitcoin and Ethereum, as the first and second largest cryptocurrencies by market capitalization, respectively, are often considered 'safe' picks in the volatile world of crypto. On the other hand, altcoins like Solana or Algorand can provide opportunities for higher returns, albeit with higher risk.

If you want to diversify, you can look for a SOL wallet, ALGO wallet, BNB wallet, etc. separately, or pick one of the multicoin wallets.

Learning More About Crypto Assets

Expanding a crypto portfolio involves more than just buying different coins. It requires a deep understanding of each asset, its use cases, market performance, and potential risks. For this reason, continuous learning is a key part of crypto investing.

Fortunately, there are numerous resources available for those seeking to learn more about different crypto assets. For instance, those interested in staking can read about Algorand staking, while those looking to add BNB to their MetaMask wallet can follow our guide on how to add Binance Smart Chain to MetaMask.

In conclusion, while BNB plays a significant role in the Binance ecosystem and can be a valuable addition to a diverse crypto portfolio, it's essential to understand the broader crypto landscape. This includes familiarizing oneself with other available cryptocurrencies, exploring different investment strategies, and continuously learning about the ever-evolving world of digital assets.



Subscribe to our newsletter
Sign up to receive the latest news and updates about your wallet.
Related Posts