What is the BNB Coin? How does it relate to Binance Smart Chain?

What is the BNB Coin? How does it relate to Binance Smart Chain?
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Binance Smart Chain was mainly the first Defi application in which people started their investments. They staked some BNB coins to earn some money. The people who invested one thousand dollars into BNB token got it shot up like ten thousand dollars which was a phenomenal experience.

What is Binance?

It is among the largest cryptocurrency exchanges rivaling other exchanges like Coinbase, GEMINI, and FTX. A while ago, binance decided to create their blockchain to develop fast and could handle a lot of data. At the start, their binance chain is blockchain-focused only on the binance exchange. After some time, they saw Ethereum booming and pondered they needed something extraordinary called smart contracts to urge other people to use their blockchain. These smart contracts are a significant part of the crypto that allows people to create applications that run on the blockchain. The smart contracts also permit the creation of new tokens on the blockchain. Anything DeFi related is because of smart contracts that allow us to run decentralized applications, create new tokens on the blockchain, mint NFTs and even do more complicated things that you can learn about.

In a specific smart contracts video, two years after they started that blockchain, binance finally got over it and created a second blockchain with smart contracts, and they called this one the Binance Smart Chain. New users must understand that there are two binance chains, the original binance chain and the new binance smart chain. If you mistakenly send your crypto on one chain to another chain, not knowing this, you can quickly lose your funds. Instead of initiating from scratch and setting up new smart contracts, binance just forked Ethereum’s code so that they could have the same features but with a few changes that made it faster and cheaper. In the developer world, a fork is a term that means they copied and pasted Ethereum’s code and then made their changes to achieve faster speeds and cheaper transactions. They have to give up some of the decentralization. Copying most of Ethereum’s code also aimed that developers could quickly move their projects from the Ethereum network to the binance smart chain network without writing much code.

Binance Smart Chain & the Consensus Model

The model that this smart chain uses is delegated proof of stake. The top 21 people staking the most BNB coins get to decide which transactions get approved and which ones get blocked. Now, if you don’t want to be one of those top 21 people holding millions of dollars of BNB, you can earn staking rewards without owning that much BNB. You only have to delegate your coins to a top validator, and they’ll share their rewards with you. Overall, this method is relatively centralized, but it does allow for those cheaper fees and more transactions per second.

BSC is much cheaper than Ethereum

The binance smart chain is so cheaper than Ethereum that practically anyone can make hundreds of transactions without spending much more than a dollar on Ethereum. The average transaction can cost three dollars up to over fifty dollars and much higher than complex smart contract usages. The thing is that anyone can create their token very affordably on the binance smart chain, and because of this, malicious developers and scams started to pop up all over the place on the binance smart chain network.

What is PancakeSwap?

It was the first popular decentralized exchange that allowed people to swap one token for another token, and early users were able to create their tokens from scratch and then advertise them on websites. Most of these new tokens were scams, and since this is a decentralized world, nobody is held accountable. Other than that, BNB still has many unique use cases as it is faster and cheaper than Ethereum, but many other copycat blockchains have come along as competition. Polygon, for example, is quite similar, but many users of polygon learned from their mistakes from the binance smart chain.

Tokenomics of BNB coin

There were initially 200 million BNB coins minted. Half of them were sold for 15 cents each, raising around 15 million dollars. This means those early investors got a decent chunk of change as the price is about 400 dollars now. Another forty percent of all the coins were given to the founding team, with around twenty percent vested each year. This means they don’t get all the coins at once, only so much per year. They gave the final ten percent of all the coins to angel investors. One fascinating thing about the BNB coin is that the binance company repurchases them each quarter. Every three months, they take 20 of all the profit of binance and use it to buy back tokens, and then they take those tokens, and they burn them forever. This decreases the total supply, which theoretically should raise the price. This is a good idea for passing profits from the company through the blockchain to their coin, and they’ll continue to do this until the supply goes from 200 million to 100 million total coins.

Uses of the BNB coin

There are also many other uses of the BNB coin. The best one is that you can save on trading fees when you use the binance exchange. They also have other marketplaces where you can get discounts on monthly services and electronics if you pay them with BNB. One service is Canva, a design mock-up website that you could use BNB to pay for. There are even traveling benefits to owning BNB. Binance is incorporated in the Cayman Islands. They have a Binance.com and a Binance.US website which offers different services to US users and international users.