Why Binance Coin is up more than 1 400% over the last year

Many are betting this is the future of blockchain-based financial services.
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Binance is the world’s largest crypto exchange, and Binance Coin (BNB) was created as an easy way to pay fees on the exchange. It has since been updated to be the native coin of the Binance network, also known as Binance Smart Chain.

Binance is an extraordinary success story: founded in July 2017 by Chinese-Canadian coder Changpeng Zhao, it came from nowhere to become the world’s largest crypto exchange, with trading volume in excess of $2 trillion in 2020. That has made Zhao a billionaire a few times over – and all in the space of four years.

Its phenomenal rate of growth has brought it to the attention of regulators in the US, Singapore and SA, to name a few. That scrutiny prompted it to stop offering futures and derivatives in certain parts of the world so as to remain on the right side of the regulator.

Apart from being an exchange for the trading of cryptos, Binance is also a network that facilitates financial transactions using smart contracts, and to this extent, competes with the likes of Ethereum – the difference being that Ethereum is a decentralised exchange operating across thousands of nodes or computers, whereas the Binance network appears to be a lot more centralised.

BNB has shot up more than 1 400% over the last 12 months, one of several crypto assets to post gains of 1 000% or more.

Some of the steam has been taken out of BNB is recent weeks, in large part because of the aforementioned regulatory scrutiny.

However, there are some persuasive reasons to consider BNB as part of a well-rounded crypto portfolio, says Brett Hope Robertson (BHR), investment analyst with Revix, who helps us unpack the story behind BNB.

What exactly is Binance Coin, or BNB?

BHR: BNB is the native cryptocurrency of the Binance exchange. The Binance coin was originally created as an ERC-20 token on the Ethereum network but has since moved away from this and developed its own network, the Binance Smart Chain. The Binance Smart Chain is a smart contract-enabled blockchain network created with the goal of creating a decentralised financial (DeFi) ecosystem.

Firstly, BNB was created as an easy way for Binance users to pay trading fees and furthermore as a utility token.

Now basically, a utility token is a token that cannot be considered as money, but rather gives users access to products and services on that specific platform. In terms of Binance, if you held the token you would pay a smaller trading fee than if you didn’t hold it.

Under the Binance Smart Chain, you would also need BNB to pay fees associated with the smart contracts built on top of it. This is similar to how you use Ethereum to pay fees when using Ethereum-based smart contracts.

A key advantage of the Binance network is that it can run DeFi protocols, but at much lower costs and at greater speeds than Ethereum.

Although the kicker, without getting too technical, is that the Binance smart chain isn’t as decentralised as the likes of Ethereum and gives up some decentralisation for speed and lower costs.

We’ve previously spoken about the ‘Ethereum killers’ like Solana, Cardano and Polkadot. These are networks – with their own native currencies – that are competing with Ethereum to operate as the platform for the new generation of financial services that will radically change the world. The Binance network could also be styled as a possible Ethereum-killer because it already offers some serious advantages over Ethereum in terms of costs and speed.

Actually, based on total value locked into smart contracts, Binance Smart Chain is the second-largest behind Ethereum. The total value locked (TVL) is simply the number of assets currently being held on specific smart contract platforms. TVL therefore shows exactly which smart contract platforms are attracting the most money, and hence the most adoption.

With a market cap of $71 billion, BNB is the fourth largest crypto by market cap, and there are many good reasons to include this in a diversified crypto portfolio.

What is the primary purpose of BNB and Binance?

BHR: BNB is a cryptocurrency that can be spent on the Binance trading exchange or by interacting with DeFi protocols built on its smart chain. Binance allows users to participate in multiple features, such as trading, investing, earning interest, lending, borrowing, and much more. For all of these features, you will be able to use BNB to pay the fees. Binance also incentives users to hold increasing amounts of BNB; users can receive a greater reduction in fees by holding a larger amount of BNB.

There are many good reasons to own some BNB, whether you are interested in transacting on the Binance network or not.

Perhaps the key reason is that it gives you exposure to the biggest crypto exchange in the world, the second biggest smart contract cryptocurrency, and one of the best performing crypto assets of the last few years.

As stated above, the Binance Smart Chain offers faster transaction times, lower fees and a programming capability that makes it easy for developers to create complex smart contracts.

Yes, Binance has had its regulatory scrutiny from different governments around the world, but it is actively trying to fix these issues.

Is BNB a safe investment?

BHR: Like all cryptos, it’s volatile, so you should expect wild swings in price, both up and down. It’s not for the faint-hearted, but we at Revix have consistently argued for a diversified crypto portfolio, and that portfolio would have to include the biggest crypto exchange in the world.

There are higher returning crypto assets, but we try to find the balance between cryptos that are fundamentally sound and those that are likely to be here in five years from now. Binance is arguably one of the most successful business stories of the last few years. Binance is currently generating a total trading volume of roughly $60-$90 billion a day, that’s about five times greater than its closest competitor.

How can people buy BNB?

BHR: Revix will be one of the first platforms in South Africa to offer Binance coin as a standalone cryptocurrency investment option. Revix will be offering Binance coin from September 24 with an enticing fee-free promotion.

Revix Promotions

  • Revix will offer zero buying fees on Binance coin purchases when using ZAR and GBP for one week (September 24 to September 30, 2021)
  • ​​Revix will also be offering a refer a friend promotion whereby if you refer a friend using your referral code, you will receive double the Revix rewards to the value of R600 per referral (promotion is valid from September 17 to September 30, 2021).

This is the latest offering from Revix, following its recent launches of a number of altcoins such as Solana, Uniswap, Cardano and Polkadot.

In addition to this, Revix offers ‘bundled’ products:

The Top 10 Bundle, which spreads your investment equally across the 10 largest cryptocurrencies as measured by market cap;

The Smart Contract Bundle, which spreads your investment equally across the Top 5 smart contract cryptocurrencies; and

The Payments Bundle, which spreads your investment equally across the Top 5 cryptocurrencies focused on payments, giving you balanced exposure to these crypto sectors.

About Revix

Revix brings simplicity, trust and great customer service to investing. Its 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.

Brought to you by Revix.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.

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