Token Analysis: BNB

BNB (Binance Coin) is the native token of Binance, the largest spot and derivative crypto exchange. Founded in 2017 by Changpeng Zhao (aka CZ), Binance caters to an international audience with a wide selection of cryptocurrencies, low trading fees, and fast transaction processing.
What is BNB?

BNB was launched in July 2017 as a means of payment for transaction fees. It was initially issued as an ERC-20 token on the Ethereum blockchain, but has since migrated to its own blockchain, the Binance Smart Chain (BSC).

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Utility and Incentives

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While BNB was initially created to pay for transaction fees on Binance, other utilities have grown around the token and the Binance ecosystem.

  • Binance Smart Chain (BSC) – the chain on which BNB lives is used to execute smart contracts similarly to the Ethereum chain. BSC is compatible with the Ethereum Virtual Machine (EVM), but aims to offer faster transaction speeds (300/second vs 15-20/second) with lower fees. Utility: pay fees for compute & programmatic transactions
  • Transaction fees – pay for trades on the Binance exchange. Binance users who pay in BNB receive a discount on their trading fees, with other benefits unlocked depending on how much BNB is held by the user. These fee discounts will decrease over time to 0. Utility: currency used for on-exchange transactions. Incentive: buy and hold BNB for discounts.

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  • Payments – Binance’s merchant partnerships allow users to spend BNB tokens instead of fiat. Plus, their 8% BNB cashback card allows users to earn BNB while making fiat purchases. Utility: pay for real goods and services w/ BNB. Incentive: 8% BNB cashback.
  • Staking – users who agree to stake BNB (holding BNB for a certain amount of time) receive up to 27.49% Annual Interest on their staked tokens. Incentive: hold BNB to earn interest.
  • Buybacks and burns – Every quarter, Binance purchases BNB tokens from the market and burns them (essentially destroys them). The amount of BNB bought back and burned each quarter is announced in advance, and is equal to 20% of Binance’s gross profits for the quarter. The of price BNB will trend upward with decreasing supply and steady demand. Incentive: hold BNB.

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Vesting and allocation of BNB

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With the launch of the Binance exchange, Binance sold 100 million BNB tokens, equivalent to 50% of the total BNB supply. This initial sale included weekly price hikes: in the first week, 1 ETH equated to 2700, in the second week – 2500, third week – 2300.

40% of the supply (80 million BNB tokens) are reserved for the founding team. These tokens have been placed under a 4-year vesting schedule with 20% vested immediately at launch, with 20% vested every subsequent year.

A final 10% of the supply, 20 million BNB tokens, was distributed to angel investors at launch.

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Insert Liquifi Vesting schedule graphic here

BNB remains heavily centralized, with two wallets accounting for more than 97% of the total BNB supply:

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Future Prospects

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Because of its positioning not just as a utility token for the Binance exchange and BSC, but as a payment product, Binance can easily add value into the foreseeable future by tying BNB into new products and features. As Binance adds these new features to its arsenal such as trading on margin, futures trading, and initial coin offerings (ICOs) through Binance Launchpad, the added value from these additions will reflect in BNB token as well.

It should be noted that incentive for holding BNB may decrease slightly as fee discounts are phased out on the Binance exchange.

Binance Coin Whitepaper: https://www.exodus.com/assets/docs/binance-coin-whitepaper.pdf

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Robin Ji
Founder and CEO of Liquifi