Binance Coin (BNB) Assessment: How Does It Work? Is it value investing? – AsiaOne

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The world of cryptocurrencies is dominated by Bitcoin (BTC) and Ethereum (ETH). But what’s outside of the Big Two? Now you are entering the field of alternative cryptocurrencies. These can be roughly divided into three types:

  • Stablecoins, such as Tether (USDT)
  • Memecoins, such as Dogecoin (DOGE)
  • Utility coins such as Binance Coin (BNB)

Of the three cryptos listed above, Binance Coin (BNB) has the highest value. But what does it do? In this article, we delve deep into the history of Binance Coins (BNB) – what it’s about, why they exist, and what historical value they have.

The price chart of Binance Coin (BNB) since its inception

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To put things in context, the price of Binance Coin (BNB) hovered around $ 20 for much of its lifespan until the cryptocurrency boom in March 2021.

The value of Binance Coin (BNB) peaked on May 10, 2021 with an all-time high of $ 915. Coincidentally, the value of Bitcoin (BTC) was around $ 77,000 and the value of Ether (ETH) was around $ 5,200 on the same day.

Binance media outlets are still not entirely sure why Binance Coin (BNB) liked so much in this timeframe, but it is widely believed that Binance’s business moves, architectural changes to its blockchain network, and its competitor Coinbase one direct listing on the stock market caused the value of Binance Coin to skyrocket.

Today, the value of Binance Coin (BNB) – along with Bitcoin (BTC) and Ether (ETH) – has plummeted since its peak.

While not a resounding crypto hit, BNB stands out for its relative stability and accessible price point when compared to its more well-known counterparts. Altcoins like these are worth considering for investors looking to diversify their cryptocurrency portfolio.

ALSO READ: Hackers are stealing $ 41 million worth of Bitcoin from Binance cryptocurrency exchange

What is Binance Coin (BNB)?

But apart from its historic achievement, what is Binance Coin really? Why is it the most popular of all the altcoins?

Binance Coin (BNB) originally started out as a way to pay trading fees in the popular Binance crypto exchange ecosystem.

If you were to trade cryptocurrencies on the Binance International Exchange, you would be charged a trading fee of 0.1 percent. However, if you use Binance Coin (BNB) to pay trading fees, you will get a 25 percent discount as the following screenshot shows:

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Binance makes it very clear that BNB strictly a “Utility coin” intended for use in his closed garden. Unlike Bitcoin, for example, Binance Coin is not intended to overturn the traditional fiat currency or to decentralize entire parts of the economy.

What else is Binance Coin (BNB) used for?

Aside from paying Binance trading fees, Binance Coin (BNB) can now be used to:

  • Pay the trading fees to Binance DEX (Decentralized Exchange)
  • Pay transaction fees on the Binance Chain
  • Pay transaction fees in the Binance Smart Chain
  • Paying for goods and services for both online and in-store purchases (e.g. with Binance Card or Binance Pay)
  • Pay for hotel and / or flight bookings and more at Travala.com
  • Use as a community utility token in the Binance Smart Chain ecosystem (like games and DApps)
  • Participate in token sales hosted on the Binance Launchpad
  • Donate for Binance Charity
  • Provision of liquidity on Binance Liquid Swap

For most of us, the most appropriate use of Binance Coin (BNB) would be paying trading fees on the Binance International Exchange, paying for goods and services using the Binance Card or Binance Pay, or paying for hotel and / or flight bookings on Travala.com.

That being said, the Binance Card and Binance Pay system is not yet available in Singapore.

Can you use BNB on Binance Singapore?

It’s worth noting that BNB works as a payment method on Binance International Exchange – but NOT on Binance Singapore. You cannot currently use Binance Coin (BNB) on Binance Singapore to pay your trading fees.

Binance Singapore offers something called a Binance Cash Wallet, but that is completely different from Binance Coin. The Binance Cash Wallet is like any other e-wallet – basically a way for you to store Singapore dollars on the platform.

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You will still have to pay the 0.6 percent trading fees in SGD.

However, you can buy and sell Binance Coin (BNB) on the Binance Singapore crypto exchange and then use it to trade on the Binance International Exchange.

You would then transfer your newly acquired Binance Coin (BNB) from Binance Singapore to Binance International to take advantage of the lower trading fees.

Note that this process is a bit cumbersome and there are two types of transaction fees – the 0.6 percent trading fee for buying Binance Coin (BNB) with Singapore dollars and the 0.001 BNB fee for transferring Binance Singapore to Binance International.

How does Binance Coin (BNB) keep its value?

Binance Coin (BNB) uses a mix of a supply cap (similar to Bitcoin) and a coin sink (similar to Ethereum).

Cryptocurrency price Market capitalization Circulation supply Supply cap
Binance Coin (BNB) ~ $ 470 ~ $ 70 billion 153.4 million BNB 200 million BNB

Binance Coin (BNB) maintains its value by using a supply cap. Binance has also implemented a Quarterly Burn system to keep Binance Coin (BNB) tight and its transaction fees relatively stable compared to Ethereum’s ever-increasing transaction fees.

Binance plans to burn a total of 100 million Binance Coins (BNB) – 30 million Binance Coins (BNB) have already been burned so far.

Should you buy Binance Coin as an investment?

The short answer is: No, Binance Coin is not an investment in itself.

You should only buy Binance Coin (BNB) if you want to trade cryptocurrencies on Binance International to take advantage of the lower trading fees, or if you want to transact in any part of the Binance ecosystem.

Binance is very clear in its stance on and intends to use Binance Coin (BNB) as a utility token.

As mentioned earlier, if you decide to take this step, the cheapest way to buy Binance Coin (BNB) with Singapore Dollars is via Binance Singapore and then transferring to Binance International.

Although this process incurs two types of transaction fees, it is still cheaper and can be easily done with just SGD.

Otherwise, you will either need a multi-currency account to fund your Binance International account or you will be looking for a compatible one Credit card (not recommended as there is an additional one percent fee in addition to the bank’s 3.25 percent currency transaction fees anyway).

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Even so, you shouldn’t write off every single altcoin as worthless, except within its own ecosystem.

Each crypto has a different purpose (and thus potential) and must be assessed individually.

We end our crypto article once again with a disclaimer that cryptocurrency is a very volatile form of investment, regardless of which coin you buy!

So always do your due diligence before buying and don’t invest more than you can afford to lose.

Make sure you also diversify your portfolio well with traditional investments like stocks, ETFs and REITs via online brokerages in Singapore.

This article was first published in MoneySmart.

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