IS BNB A Good Investment?

As the 3rd highest cryptocurrency by marketcap after Bitcoin and Ethereum, it is safe to say Binance Coin has come a long way. Beginning in 2017, it has since then created its Blockchain and stood out. This article is a detailed guide for crypto newbies and experienced traders who want to diversify their portfolios and are interested in BNB.

What Is BNB?

Binance Coin is the native token of the largest crypto exchange in the world, Binance. It worked on Binance Smart Chain and was created by Changpeng Zhao (CZ), previously the CEO of OKcoin.

Binance started in 2017 after it was launched on the Ethereum Blockchain. Since then it has moved to its own native Blockchain, Binance Smart Chain. Three weeks after it was launched, BNB accumulated 15 million after being traded on the ICO offering. It is set at a hard cap of 200 million coins, with over 150 million currently in circulation.

BNB was created to serve as a utility token when it was first introduced. It was used as a discount token to give traders a 50 or 25% discount on trading charges and is an ERC-20 token based on the Ethereum Blockchain.

BNB became independent in September 2020 when it created its Blockchain known as Binance Smart Chain (BSC). The blockchain has many similarities with Ethereum as it accommodates Smart contracts, Decentralized applications and DeFi.

How Does Binance Coin Function?

Just like many other crypto projects, Binance Coin has its own set of unique capabilities that cannot be found on other crypto projects. Even Though the Blockchain itself is not very different from other Blockchains, there are many of its features that are worth looking into.

BNB Blockchain

BNB was created around a blockchain technology known as the Tendermint byzantine-fault-tolerant consensus mechanism. The process validates transactions through the following nodes

• Validators: These are BNB holders that validate transactions on the Blockchain network to ensure the security of the system
• Witness: These nodes witness the process of transactions and validation.
• Accelerators: These are organizers who ensure the whole process of transactions and transaction confirmation is fast and reliable.

Similarities with Ethereum

BNB is similar to Ethereum as the latter was BNB’s pioneer Blockchain. However, their differences are much more defined since BNB has moved to Binance Smart Chain.

Centralized Blockchain Network

BNB is also popular for being a centralized Blockchain. As one of the main reasons for creating a cryptocurrency is decentralization, BNB might not be favoured by most crypto enthusiasts and we could even say that BNB is as weak as fiat currencies. According to a source, the Binance organization owns 40% of the total coin supply of BNB.

Coin Burning

One other notable capability of BNB is coin burning; it is the opposite of coin mining. Coin burning reduces the tokens in circulation to maintain the value of the coin and create scarcity.

According to the network’s white paper, Binance plans to burn the Binance Coin every month using the smart contract. The burning will be regulated by the volume of BNB traded on its platforms.

After all the transactions are logged onto the Binance Smart Chain, the burning will begin, and a token will not be able to be returned once burnt. After reaching its 200 million caps, Binance will start the coin burning gradually. After 100 million coins are left, the network will stop burning its coin. Binance organization burns coins by trading 20% of their profits to buy back BNB.

Coin burning is a plan devised by Binance Team to reward itself for its work on BNB. The burning checkmates any future inflation of the coin and rather deflates. The reduction in circulation increases its demand which in turn shoots up its price over time.

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BNB’s Binance Card

Another interesting feature introduced to the Binance Exchange is the Binance Card. With the Binance Card, traders can convert their BNB into local currencies to make real-time transactions. The Binance Card, made by Swipe, is linked to the card wallet in the user’s Binance exchange account. Although, the feature is not only offered by BNB, as Binance Exchange and Binance Smart Chain house numerous tokens. Nonetheless, BNB is a frontrunner in the Binance Visa Debit Card.

BNB: The Utility Token

Binance Coin has built itself a reputation as a utility token. As it offers 25% on the Binance exchange, the token has been appealing to crypto traders. It can be used as transaction charges, exchange fees, commissions and voting tokens for new projects ready to be launched.

So, as the ultimate discount token, traders see it as a lucrative option.

However, the point is, how long will the discounts continue? It started discounting upon its creation when it took 50% off transaction charges. It was later reduced to a 25% discount, while the coin planned to reduce it to 6.75% by 2021. However, it never happened.

So, if these discounts are eventually cast away, it may give investors no reason to invest in BNB unless it introduces an innovation that solves underlying crypto problems.

BNB Price History and Prediction

Compared to many other coins, Binance Coin went through a stable rise following the crypto booms and depressions. When it was created in 2017, it was traded at $0.1051 and has seen a steady rise since then.

With the crypto bull run of 2017, it reached $8 in December 2017. By 2018, it started a downtrend and recovered back in 2019. BNB was mostly going with the trends of all other cryptocurrencies at that time. Even though it was not a powerhouse in 2019, it still traded at a $38 high.

Then the pandemic affected its price. It came down back to $10 around the end of February 2020. It recovered back to $38 by the end of the year.

Then, the crypto bull runs in 2021 started, and Binance Coin was not left behind. It was one of the major beneficiaries after seeing over a 300% rise in months.

It traded $336 in February 2021, $598 in April, and $690 in May. Since then, the price of Binance Coin has been going up. However, it witnessed a recent downturn.

Towards the end of November 2021, BNB was trading at $592.61. It currently ranks 3rd among other cryptocurrencies and has a volume of 166,801,148.00 BNB currently in circulation.

Walletinvestor believes BNB would be an awesome short- and long-term investment. According to their forecast, the coin value could reach $987 in the next 1 year. And in 5 years, the BNB price could exceed $2600.

Digitalcoinprice BNB price prediction is also bullish. The popular platform estimates the BNB price to reach $1000 by 2022. Also, they project the coin to trade above $1200 in 2023 and $1800 in 2025. In essence, the experts on the platform agree with Walletinvestor that BNB will be a profitable long- and short-term investment.

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Is Binance Coin A Good Investment?

Pros

Utility Token

Being a leading utility token, BNB is very relevant across all platforms. It can be traded and used to pay any fees, including transaction charges, online transactions, transfers, and so on. It also offers a real-time alternative to fiat currencies.

Coin Burning

BNB devised a coin-burning strategy that stands it in good stead over the coming years. 20% of the Binance team’s profit is used to buy the coin back to reduce the total circulation.

This deflationary policy will increase the coin price over the coming years while being low inflation risk. The feature can be very beneficial to investors as they will be able to easily predict when BNB prices will rise or remain stable.

The Discount Token

When paying charges with BNB, it gives a 25% discount. This feature has made it draw a force of loyal traders who use the BNB for daily transactions. This unique feature could give it a cutting edge among other coins over the next few years.

Influence of Binance Exchange

BNB and Binance Smart Chain have been helped greatly by Binance. As the world’s largest crypto exchange, Binance has increased BNB’s reputation among crypto traders. It is currently ranked as the 3rd largest cryptocurrency behind Bitcoin and Ethereum.

Viable Ethereum Competitor

With a similar setup to Ethereum and lower transaction fees, Binance Smart Chain is seen as a viable alternative to Ethereum. After the BSC was launched in 2020, many dApps moved to the network as it is pretty similar and costs less than Ethereum. Today, BSC boasts the second-largest DeFi in its Blockchain ecosystem and houses more DeFi apps than Bitcoin.

Cons

Centralized Coin

BNB is at loggerheads with the main aim of cryptocurrency; creating decentralized finance that is not controlled by a central system. However, BNB is controlled by a central system as 80% of its tokens are owned by Binance.

This shortcoming is a major put-off as Binance has control over transaction validation. It makes the BSC vulnerable to double-spending, at risk of attacks and manipulation by individuals.

Sanctions from Numerous Government

Several countries have placed sanctions on Binance. The company has seen the wrath of the UK, Japanese, Thai, Canadian and German governments.

In April, BaFin of Germany warned Binance that it could be fined for issuing its securities-tracking digital token without publishing an investor prospectus.

A few months after in July, Thailand probed Binance on why it is operating an unlicensed digital-asset business.

It also ran into trouble with Japan and Canada in June 2021 and Malta in February 2020. This string of warnings from the different governments could lead to its eventual ban, affecting its Blockchain and token adversely.

Security

Binance has been susceptible to major attacks since its inception. A hack was attempted in 2018, although unsuccessful. In 2019, the system was hacked, while $40 million worth of BNB was stolen. Although the Binance Team have put much effort into its Security, the string of attacks on the network makes it unviable for investors.

Competition

Binance is not the only smart contract Blockchain available; there are many of them. Even though it is seen as an Ethereum alternative, the latter is moving into a PoS network. This new technology on Ethereum would allow the Blockchain to make transactions at low fees, thereby removing the competitive advantage Binance has over Ethereum.

With this happening, DeFi Apps may troop back to Ethereum, thereby affecting Binance Coin in the long run. Polkadot, Cardano, amongst other cryptocurrencies, are also running behind and ready to overtake Binance Coin at any chance to do so.

Determining whether Binance Coin is a good investment or not is the decision of the trader. As a crypto trader, only you alone can measure whether the pros outweigh its cons and whether it will fit your risk tolerance, trading style and goals over the coming years.

As the native token of Binance, it is safe to say BNB is a worthy investment. However, that doesn’t erase its risks. All crypto investments are highly risky, and BNB is not left behind. All in all, the trader must make sure to do thorough research before investing in the coin.