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Issue #13: A simple exchange coin grows into a massive decentralized Web3 ecosystem

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Summary

SymbolBNBCirculating Supply (estimated)157,900,174
Rank (MCAP)#4Total Supply157,900,174
(max 200,000,000)
Price (02/23/23)US$312.82Market CapitalizationUS$49,237,739,377

Complete historical BNB price chart. Source: CoinGecko

In this report, we’ll answer the following: 

What is BNB?

BNB is the Build N Build (BNB) Chain’s native coin. Developers create decentralized apps (dApps) on this L1 chain. 

Binance’s CEO has emphasized that BNB Chain aims to keep fees low. Meanwhile, its goal is to build on Ethereum’s (ETH) successes.

Summary diagram of BNB Chain’s offerings. Source: ChainDebrief

Binance helped create the BNB token and BNB Chain. Yet, the BNB chain is separate and decentralized. Binance does not own it. This partitioning mitigates long-term risks from a centralized owner.

Instead, Binance supports the chain’s decentralization and independence. The BNB Chain’s validators and community vote to determine the chain’s future.

Who’s behind BNB, and how did it begin?

The BNB token began with the juggernaut crypto exchange Binance in 2017. Changpeng Zhao (CZ) and Yi He co founded Binance. Users could get a trading fee discount by paying fees with the BNB token.

The token’s utility grew in April 2019 when Binance launched Binance Chain. Over a year later, decentralized finance (DeFi) exploded in popularity. 

Binance then launched Binance Smart Chain (BSC). BSC added smart contracts, allowing developers to build dApps. Its low fees relative to Ethereum made it a popular chain for many DeFi users.

BSC and Binance Chain joined in February 2022 to create the BNB Chain. BSC continues to provide infrastructure for a massive dApp ecosystem. The Binance Chain became the BNB Beacon Chain. It focuses on staking and governance voting.

What are the BNB token’s uses?

BNB tokens have many uses, thanks to BNB Chain’s large ecosystem and partnerships. These use cases include:

How are BNB tokens distributed and released?

BNB launched in July 2017 with 200 million tokens. Its initial coin offering (ICO) sold 100 million BNB tokens at US$0.15 per token.

This public sale distributed 50% of the initial BNB tokens. Another 10% went to angel investors. The founding team received the final 40%.

BNB tokens burn in real-time. These burns began with BEP95, which burns a fixed ratio of collected gas fees.

More BNB tokens burn every quarter. This auto-burn process reduces the token’s total supply until it reaches 100 million. By burning supply, fewer tokens are circulating on the market. This reduced supply helps the token’s price climb.

Binance tweets the results of its Jan 2023 quarterly burn. Source: @Binance on Twitter

Also, BNB uses a “Pioneer Burn.” If a user can prove they lost their tokens, this program burns an equal amount of BNB. These burned tokens count toward quarterly burns.

How could BNB be valuable in the future?

BNB ties to Binance increase its odds of thriving

Binance doesn’t control the decentralized BNB Chain. Yet, the two have strong ties due to their history.

It’s unlikely that Binance will disappear anytime soon. It’s currently the top centralized crypto spot trading exchange.

Binance is the top centralized crypto exchange. Source: CoinMarketCap

This support can help BNB survive where other tokens have died. For example, FTX was a popular crypto exchange until recently. After its collapse due to mishandling, the FTT token’s value plummeted.

In contrast, Binance has been a leading exchange for over five years. This longevity and its massive success show that its leadership team is capable. As long as Binance survives, the BNB token has higher odds of retaining or gaining value.

Also, Binance invests significant capital in helping the BNB Chain’s ecosystem grow. These dApps use BNB, creating innovative ways to use the BNB token and increase its value.

The BNB token is deflationary

Most cryptocurrency tokens are inflationary. Their supply increases over time due to emissions. For example, they may create new tokens to reward token stakers.

In contrast, BNB’s token is deflationary. Transactions burn a part of their BNB gas fees. Quarterly burns also continue to reduce supply until it reaches 100 million.

This supply management encourages investors to buy the token. BNB tokens are becoming scarcer while their utility increases. Meanwhile, there is no risk of infinite inflation pressuring the price downward.

Increased scarcity and demand make it easier for the token’s price to climb over time. These dynamics make BNB a more attractive investment for long-term investors. More investors further increase demand.

What’s next for BNB?

BNB Chain has an ambitious roadmap focused on

These changes attract new developers and users. A larger ecosystem helps increase demand for the BNB token while reducing supply through transaction burns. This dynamic help the BNB token to gain value.

Greenfield decentralized storage system

In February 2023, BNB Chain announced a new product: BNB Greenfield. This feature will provide decentralized cloud data storage.

BNB Chain recently announced the BNB Greenfield whitepaper on Twitter. Source: @BNBCHAIN on Twitter

Tech giants like Google and Amazon provide much of today’s cloud storage. Yet, these entities are centralized.

Users run some risks when storing their data with centralized services. For example, these centralized entities could shut down and lose data. They could also block a user’s access to their data. Decentralized storage aims to solve these problems by letting users own their data.

BNB Greenfield will integrate with the BNB Chain ecosystem. This addition could encourage more dApps and users to join BNB’s ecosystem. More users on BNB Chain help the BNB token’s price to rise.

Scalability improvements

Scaling is a hot topic in the crypto industry. Too many users can bog down networks, leading to poor performance and high fees.

Zero-knowledge rollups are a popular solution to these scaling problems. BNB Chain plans to release its version, zkBNB, during 2023. It will also support scaling through an alternative technology, Optimistic rollups.

These changes will help increase the network’s performance. It’s targeting an increase from 2,200 transactions per second (TPS) to 5,000 TPS.

A faster network is more attractive to users and dApp developers. More users increase demand for the token while decreasing supply through increased burns. These factors help the token’s price climb.

Network Growth

Despite the bear market, BNB’s ecosystem is accelerating. Almost every month, developers deploy more smart contracts on BNB Chain.

 Graph of smart contracts deployed every month on BNB Chain. Source: Nansen

BNB Chain also attracted attention in February 2023 as Uniswap V3 deployed on BNB Chain. Uniswap is the largest decentralized exchange (DEX). It has over US$1.2 billion daily trading volume.

Uniswap’s launch on BNB Chain can help grow BNB’s ecosystem. This growth increases demand for BNB and increases burns. This higher demand and lower supply could make the BNB token more valuable.

What is the market saying about BNB?

BNB has a massive following

BNB Chain’s primary social media outlets have gained significant traction. They boast

Comparing BNB to a direct competitor is challenging. It’s an exchange token but also a decentralized ecosystem token.

Binance is the top centralized crypto exchange. Its closest competitor with a token is KuCoin.

KuCoin has communities in 23 languages. Its English community is the largest, with

These numbers are somewhat lower than BNB’s, even though the BNB token launched simultaneously with KuCoin. This disparity shows that BNB has gained more traction. This stronger community could help support the token’s price.

BNB also serves the BNB Chain’s ecosystem. It’s valuable to compare it to other L1 blockchain competitors.

 BNB Chain (labelled BSC) is the third-largest chain by TVL. Source: DefiLlama

Its closest competitor by total value locked (TVL) is Tron (TRX). Tron’s English community has

TRX’s social media following is much smaller than BNB’s, despite TRX having a larger TVL. This difference could suggest that the BNB Chain’s TVL has more users. Meanwhile, TRX may have fewer but larger investors. 

This investor-to-TVL ratio could suggest that BNB’s Chain is safer. BNB Chain’s potentially higher user count may show a more even power distribution.

In contrast, TRX’s lower social following might suggest that fewer entities hold more power. These large investors could make decisions causing adverse effects on TRX’s price.

BNB retains community interest

The bear market has reduced interest or destroyed many crypto projects. Meanwhile, BNB’s social volume remained high. This volume shows BNB’s users have supported the token and its chain during the bear market. 

BNB Chain also hosts many developer programs. These programs help developers build BNB Chain dApps. In turn, these dApps make the ecosystem more valuable. This innovation may have helped contribute to BNB Chain’s social volume and value.

Total social volume for BNB. Source: Santiment

The last year has been one of the most difficult the crypto industry has faced. BNB’s high social volume in challenging times is a good sign for the chain’s longevity. 

What are the risks for BNB?

Hacks, bugs and exploits

All technology runs the risk of hackers or other issues creating problems. BNB Chain is no exception.

BNB Chain survived a large hack

For example, in October 2022, hackers hit the BSC Token Hub. This hub connects the two components of the BNB Chain: BNB Beacon Chain and BNB Smart Chain. The attackers minted 2 million BNB worth approximately US$570 million.

While unfortunate, this attack illustrated some strengths of BNB. Validators worked together fast to upgrade. This coordination prevented the hacker from making off with most of the stolen funds. 

The attacker was only able to steal US$100 million. They were also unable to affect any users or the core BNB Chain.

Developers immediately fix problems

In February 2023, Jump Crypto identified a vulnerability in the BNB Chain. They notified Binance about the problem.

BNB’s core team immediately fixed the issue, avoiding a catastrophe. This response shows that BNB’s capable team can protect investors.

Binance’s CEO thanks Jump Crypto for helping them fix a vulnerability. Source: @cz_binance on Twitter

Regulation is intensifying and could affect Binance

BNB Chain’s decentralization gives it a layer of separation from Binance. Yet, it does receive support from Binance. 

The separation would help the BNB chain survive any problems affecting Binance. Still, this hypothetical collapse could lower BNB’s value.

Regulators are intensifying their efforts to regulate crypto. These initiatives follow recent headlining industry collapses. For example, the failures of Terra (LUNA) and FTX (FTT) highlighted regulatory problems.

So far, Binance has worked with regulators to avoid serious issues. It has cooperated and paid several fines. 

This success suggests Binance has high odds of surviving the coming regulatory regime. Yet, investors should keep in mind potential risks with Binance and regulations.

Bottom line

The BNB token has exploded from its humble roots. It’s transformed from a simple exchange token to the backbone of a massive Web3 ecosystem.

Its deflationary mechanisms help make it attractive to investors. As a bonus, it’s backed by Binance and serviced by a competent team.

These factors help the token survive the bear market as other projects struggle. Strong backing, coming updates and ecosystem growth may help the token gain value.

What can I do from here?

  1. Buy and hold BNB tokens [Difficulty: Easy]
  2. Stake BNB to earn rewards. [Difficulty: Easy]
  3. Pay for partners’ goods and services using BNB [Difficulty: Easy]
  4. Explore BNB Chain’s massive dApp ecosystem [Difficulty: Medium]
  5. Join BNB developer programs to develop ecosystem dApps [Difficulty: Hard]

Who should I follow?

  1. Stay up to date on BNB’s Twitter and YouTube
  2. Learn more about BNB’s ecosystem at the BNB Chain Blog
  3. Follow Binance and Binance’s CEO on Twitter
  4. Discuss BNB with its community on Telegram
  5. Explore BNB’s code and updates on its GitHub repository

Sources

The information that Ticker Nerd provides is general in nature as it has been prepared without taking account of your objectives, financial situation or needs. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Ticker Nerd is for information purposes only. Ticker Nerd is not responsible for any damages or losses that may occur as a result of reliance on this information. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.
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