Binance Coin (BNB) has been one of the top performers in the cryptocurrency market over the past month. The native cryptocurrency of the Binance exchange has doubled in value since the turn of the year. Binance Coin is not like Bitcoin or a smart contract platform like Ethereum. Instead, it has carved out a niche market as a useful token for the Binance exchange that provides discounts as well as access to the Binance infrastructure.
The Binance ICO
The Binance ICO ran in July 2017 and raised approximately $15 million. The timing of the ICO was perfect for new industries coming into the space. The ICO craze still had another six months to run before fizzling out. Despite there being larger cryptocurrency exchanges in the industry, Binance aimed to solve some key issues. These included:
- Poor technical architecture
- Poor liquidity
- Poor customer service
- Poor internationalisation
The ICO allowed for the creation of Binance Coin (BNB), with 200 million entering circulation (although 50% of this is intended to be burned eventually). The split of allocation was 50% to ICO participants, 40% to the founding team, and 10% to angel investors. Initially, Binance Coin was one of only five coins listed on the exchange in the beginning. BNB is an Ethereum ERC-20 token.
Use case of Binance Coin
Binance doesn’t aim to compete with the major players in the space, such as Bitcoin and Ethereum. Instead, the token is meant to be complimentary. Through Binance Coin, you can reduce the trading fees on Binance using the discount it provides. As a cryptocurrency though, Binance Coin can also be used like any other. If a retailer chooses to accept BNB, then you could spend it there, or if you merely like to speculate on altcoins, then this is also possible.
Binance also ran a referral programme offering a 20% discount in an attempt to drive up customer numbers. The system worked very well in helping to build a solid foundation for Binance.
BNB’s recent performance has been particularly unusual but extremely impressive. Indeed, there has been a lot of buzz around BNB in recent weeks regarding its ability to buck market trends, and its price has been soaring. This week alone, the price is up 37%, and for the month, it’s up 96%. The price rise has allowed Binance Coin to reach an all-time high compared to Bitcoin, but it still has some way to go to achieve this in dollar terms after a peak of $24 in January 2018.
There have been a few recent developments that might have caused the recent price hike. First was the launch of Binance Launchpad, an ICO token launch platform. One of the first tokens launched on the platform was Tron’s BitTorrent token, which sold out almost instantly. This has since been followed by Fetch.Ai, which raised $6 million in 10 seconds.
Another contributing factor was the launch of Binance’s decentralised exchange, where BNB will play an integral role. It should be noted however that there has been some criticism from outside that the DEX is not in fact a DEX.
There are a few other exchanges that have similar tokens such as Kucoin and Huobi. However, they have certainly not been as successful. With BNB, Binance has been able to steal some of the market share, despite not having the first mover advantage of exchanges such as Coinbase or Poloniex. With a wealth of altcoins coupled with the discount users can receive through BNB, Binance has become one of the largest exchanges out there. Credit must also be given to Changpeng ‘CZ’ Zhao, the CEO of Binance. He is extremely active on social media, and more importantly appears to understand many of the niche aspects of the community, especially the memes. He is also consistent on calling out FUD and explaining in precise terms why Binance does and doesn’t do certain activities.
Whilst many have reacted badly to the bear market, CZ has been focusing on what he calls “buidl” (a play on the hodl meme). In doing so, Binance continues to add new features and improve consistently. Of course, like anyone in the industry, he is not immune to criticism. There have been questions regarding the high price of listing fees on the exchange, which CZ refutes by saying it removes the possibility of adding “s***coins”. There was also some criticism when CZ appeared to encourage storing cryptocurrencies on the exchange itself.
Binance Coin has proved to be a very shrewd initiative by CZ. Whilst the recent price rise has surprised most, the consistent addition of new features to the Binance exchange is where most people’s focus should be. With profits of more than $400 million in 2018 despite a suffering market, Binance is in prime position to take advantage should the market turn around, and if the exchange is performing well, then Binance Coin will most likely follow suit.