The emergence of Binance Coin as a global DeFi Infrastructure

The emergence of Binance Coin as a global DeFi Infrastructure

What is the Binance ecosystem?

The crypto industry has grown at a heart-racing pace. Sector growth is not just evident in the number of conceived companies and projects but also in the size of some of those entities. Binance is one major player in the crypto space that looks back on massive growth and touts a broad range of components, products and its ecosystem. 

One important component of Binance’s ecosystem is its asset Binance Coin (BNB). The evolution of BNB goes in step with Binance’s overall expansion. 

For a general overview of what Binance Coin is, rather than an explanation of its uses, check out: What is Binance Coin (BNB) and how does it work?

History of BNB explained

Binance conducted an initial coin offering (ICO) in mid-2017, launching its centralized crypto exchange platform shortly after. The exchange launched with the BNB asset in token form — an ERC-20 token built on the Ethereum blockchain. During those early days, the token served as a way Binance exchange users could pay less trading fees. 

Binance launched its own blockchain mainnet in 2019, calling it Binance Chain (BC). Following the launch, Binance called for a token swap during which users could switch out their ERC-20 BNB tokens for BNB coins on the Binance Chain.

However, Binance Chain lacks versatility for building upon because it was constructed in a fashion that focused on performance for trading activity. Solving the issue of limited potential, Binance launched an additional blockchain called Binance Smart Chain (BSC) in 2020. The blockchain runs parallel to BC, although it serves different purposes. BSC has Ethereum Virtual Machine (EVM) functionality, for example, making it more versatile for building decentralized applications, or DApps. 

What began as a simple utility token has grown into something far more sophisticated. The original aim of BNB was to pay cheaper Binance trading costs, but that was only the beginning.

Currently, BNB has become a token that has its own blockchain and a wide range of applications. BNB was first launched on Ethereum as an ERC-20 token but was subsequently moved to Binance Chain. It serves as the network's native token and supports Binance Smart Chain.

Binance Chain and Binance Smart Chain have both proven to be quite popular among developers and users. BNB adoption has increased as the ecosystem has grown with DApps and use cases.

Binance Coin (BNB) uses

What is BNB coin used for? In short, a vast array of activities within Binance’s ecosystem. From usage as payment for fees on Binance Coin’s blockchains (BC and BSC) to collateral on Binance’s lending platform. Interested entities can also simply use BNB for holding and transferring value. 

Uses of BNB within and outside the Binance ecosystem

Fee payments 

BNB acts as a payment method for participants to pay for activity on Binance Chain and Binance Smart Chain. This can be as simple as paying fees for sending a BNB transaction. A more complex usage of BNB as fee payment might include paying for fees via BNB when using a DApp, such as a decentralized exchange (DEX) on BSC. 

BNB is also available as a method of fee payment for trades on Binance’s decentralized exchange, Binance DEX, which was built on Binance Chain. Hundreds of Binance Smart Chain initiatives are powered by BNB. It can be used for decentralized finance (DeFi), liquidity pools, DEX trading and nonfungible token (NFT) marketplace payments.

Additionally, BNB is used as a way customers of Binance’s centralized crypto exchange can pay lesser fees on the platform. A certain setting on the platform means that trading fees will be taken from users’ BNB holdings on the exchange at a discounted fee rate. However, this function of BNB may be subject to change in 2022.

Value storage and transaction vehicle

At its core, BNB is a cryptocurrency that functions similarly to other crypto assets. It runs on blockchain technology which enables holders to store the asset themselves in a compatible wallet without relying on a third party. Holders can also send the asset to other locations and people without involvement from an intermediary.  

BNB’s price changes in value constantly — the result of multiple factors which potentially include parties trading the asset for profit or using it for fees in the Binance ecosystem. Since the coin has value, as determined by the public’s demand for the asset matched with its supply, it can serve as a method of value storage and transfer.

This concept of personal wealth storage and transaction capabilities void of intermediaries can be considered as DeFi in its simplest form. 

Is BNB a good investment? Historically, BNB rose significantly in price in the years following 2017. However, that does not mean the future will come with further price increases for BNB. Everything comes with risks, and each crypto market participant should evaluate his or her own situation and make decisions appropriately while abiding by jurisdictional regulations. 

Other BNB uses

Holders can also use BNB in a multitude of other ways, such as earning passive income. Binance has a subdivision of products under its Binance Earn wing. 

The solutions essentially reward users with a varying array of percentage gains if they put their assets into one of the products. The options in the Binance Earn category work in different ways. For example, one of the options is a DeFi staking page that functions as a simplified on-ramp for staking different assets. 

A number of the products under the Binance Earn wing have options to utilize BNB in some capacity. 

In addition, BNB can also be used as a form of payment via Binance Card (a crypto-powered Visa debit card) to pay for your shopping bills. Furthermore, users can get immediate access to a simple and uncomplicated crypto loan with no hidden fees or penalties by using BNB as collateral. They can borrow Ether (ETH), Bitcoin (BTC), Binance USD (BUSD), Tether (USDT) and other cryptocurrencies with terms ranging from 7 to 180 days.

Outside the Binance ecosystem, BNB can be used for making payments for accommodations, travel, shopping, real estate and gaming. 

How to buy BNB

Binance Coin is a well-known crypto asset, so buying some is not the hardest thing in the world. BNB seekers can obviously buy the asset on Binance’s centralized crypto exchange, as well as Binance.US — Binance’s centralized exchange (CEX) for United States participants. 

BNB is also available on other centralized crypto exchanges, as well as on Binance blockchain-based DEXs.  

Buying BNB on a centralized crypto exchange is similar to buying other assets such as Bitcoin on such a platform. Buying or selling BNB on a CEX typically will include signing up for an account on one of those platforms, which usually requires submitting personal identifying information and creating a password — things of that nature. 

DEXs differ significantly from centralized crypto trading platforms. Using a DEX typically involves no log-in process and no account creation. Instead, users connect with a compatible wallet that holds some of their assets that they may wish to trade. Trades generally involve direct transactions on the DEX’s related blockchain. 

Regardless of the exchange used, it is important to be aware of applicable jurisdictional requirements and act accordingly. 

Crypto moving forward

The crypto industry as a whole has expanded significantly over the years. The sector has gained sizable mainstream attention and usage. The industry has crafted numerous unique solutions with even greater far-reaching possibilities. 

From the untapped potential of nonfungible tokens (NFTs) to the idea of finance without middlemen, the crypto space could significantly alter the world’s landscape. However, regulatory uncertainties have surfaced with such growth, adding question marks to the equation. 

Similar to the crypto industry’s overall growth is the expansion of Binance. The company has introduced a substantial number of different products pertaining to numerous categories. Native blockchains, exchanges, digital asset borrowing and more are all categories in which Binance has become involved. BNB is notably relevant in this ecosystem. 

However, regulatory waves have collided with Binance at times amid multiple jurisdictions expressing regulatory concern when it comes to the crypto company giant. Although the future is uncertain, Binance has communicated its intent on regulatory compliance efforts. That said, the future still remains unknown.