Binance Coin (BNB) was launched almost four years ago at an (almost) giveaway price of 20 000 BNB to one Bitcoin or 2 700 BNB for one Ethereum (ETH). This put its first recorded cash price at around $0.10 per coin.
Today, BNB trades at $350 or about 124 BNB for one BTC and 8.9 BNB for one ETH. Those who got in on the ground floor have made the kind of profits most crypto investors dream of.
The rate at which BNB is closing the gap on ETH and BTC is impressive and reflects the growth of Binance as a crypto exchange, and Binance Chain as a proprietary blockchain competing with the likes of Ethereum, Cardano (ADA), Solana (SOL) and Polkadot (DOT) for dominance of the new blockchain-based financial architecture currently being developed.
While Ethereum, Solana and Polkadot are decentralised networks, meaning transactions are processed and recorded simultaneously across thousands of computers or nodes across the world, Binance smart-chains validators are seen to be partially centralised due to the structure in which they are chosen. That gives it some major advantages over decentralised networks like Ethereum and Cardano in terms of low transaction costs and speed of processing.
BNB was originally launched as a way for Binance exchange clients to pay discounted fees when transacting on the exchange. The use cases for BNB have since multiplied to include transacting on the Binance exchange, as collateral for crypto loans, or to earn passive income.
Brett Hope Robertson (BHR), investment analyst at Revix, is on hand to help us delve into BNB and explain its uses, attractions, and pitfalls.
What makes BNB so exciting?
BHR: The most obvious attraction that everyone looks at first is the price gain. BNB is up more than 370 000% over its lifetime. It now sells for $350 (R5 250), compared with around $0.10 (R1.30) when it was first launched into the market. This means an investment of just R100 would have made you over R370 000.
BNB price 2017-2021 in USD
While many love to look at the price, I find Binance to be a company that’s taking on the world. It has a success story like none other.
Binance has come from nowhere to become the world’s largest crypto exchange doing volumes five times greater than its closest competitor, but it’s more than an exchange. It’s taking on everything crypto – from exchange to smart contracts and DeFi [decentralised finance] with everything in-between. Its native blockchain, called Binance Smart Chain (BSC), is taking on the likes of Ethereum, Solana, Cardano and more in what is called the ‘smart contract wars’, and they are doing very well. BSC is the second biggest smart contract player behind Ethereum. Like Solana and Cardano, the BSC offers faster transaction times, lower fees and a programming capability that makes it easy for developers to create complex smart contracts.
This means that app developers working on Ethereum can migrate their software over to Binance Chain. Ethereum’s high ‘gas’ fees and slow transaction speeds are major choke points that the network is trying to overcome, but it may take years for these choke points to be resolved.
There is a race underway for dominance of the DeFi space, even though it could be argued that Binance is possibly closer to centralised finance (CeFi). In the world of DeFi you can already lend, borrow and earn passive income, but a staggering array of new financial products is being developed on these networks. You will be able to purchase insurance and other products without the need for an intermediary such as an agent or a bank or a stock exchange, using what are called ‘smart contracts’. Much like a contract, a smart contract enables the terms of an agreement or deal to be executed. Yet, what makes it ‘smart’ is that it can execute this contract without the need for a third party. It’s incredibly exciting, and Binance is making huge strides in attracting the development of these new financial instruments.
What are the main advantages of including BNB in my crypto portfolio?
BHR: By purchasing BNB you are getting exposure the biggest crypto exchange, the second biggest smart contract player, and it probably has the widest range of product offerings to its clients. It’s almost starting to become the Amazon of the crypto space, offering ‘staking’ [where you can invest and earn interest on cryptos], credit cards, vaults, crypto custody, loans, NFTs [non-fungible tokens], options, and a whole lot more.
As I mentioned earlier, there is a race for smart contract dominance and the development of the new financial age. Binance is one of the contenders, and funny enough, it’s one that isn’t really spoken about – I think this is a mistake. No one knows who will win this race, and therefore, it makes sense to diversify your risk and own a crypto portfolio with multiple contenders.
One of the criticisms of cryptos is the erroneous claim that it is all hype, with no business case. That is certainly no longer the case. These networks are generating massive amounts of fees, which can be tracked and measured. Binance Chain and its smart chain network (Binance Smart Chain) have some impressive technology behind them, and these networks have become formidable forces in this new financial world we are entering.
Aren’t there some risks with Binance?
BHR: Yes, price risk being one of them. The price is volatile when compared to traditional assets, but crypto investors are used to that. Another risk is that Binance is getting regulatory heat around the world, but it seems to be doing what is needed to stay on the right side of the regulators.
There are risks, but these risks are somewhat manageable. Those looking for a diversified crypto portfolio will probably have some exposure to BNB.
How has BNB performed in recent times?
BHR: BNB is up 1 200% over the last 12 months. It’s been as high as $704 – in May this year – and has since pulled back to $350.
It’s extremely volatile, as are most cryptocurrencies, and one should be prepared for wild price movements – both up and down. Dollar cost averaging is a proven strategy when investing in cryptocurrencies over time. In other words, you invest into BNB a regular amount once a month or once a week, without trying to trade the price.
How can South Africans buy BNB and does Revix offer any promotion?
BHR: BNB was recently launched as a standalone cryptocurrency on Revix, and anyone buying BNB with ZAR or GBP can do so without having to pay any fees until September 30. This is another great reason to add some BNB to your crypto portfolio.
Revix brings simplicity, trust and great customer service to investing. Their easy to use online platform enables anyone to securely own the world’s top investments in just a few clicks.
Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.
For more information, please visit www.revix.com
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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