The very first DeFi app I invested in was on the Binance Smart Chain, where I staked some BNB to earn some money. The next day, I checked and realized I really did make money, and that’s where the DeFi rabbit hole started for me. About a month later, I invested around $1000 into a BNB token and it shot up to around $10,000, and that was a phenomenal experience, but I got lucky. My point is that BNB and the Binance Smart Chain holds a special place in my heart, but first...

First off, let me explain what Binance is, and then we’ll get to the BNB coin you can buy and sell. 

To understand the BNB coin, we must first learn about the history of Binance. Binance is one of the largest cryptocurrency exchanges, rivaling other exchanges like Coinbase, Gemini, and recently FTX. One day, Binance decided to create their own blockchain, aiming to create one that was fast and could handle a lot of data. 

Binance Chain

At first, their “Binance Chain” blockchain focused only on the Binance exchange, but after a bit they saw Ethereum booming and realized they needed something called smart contracts, if they wanted other people to use their blockchain. If you don’t know already, smart contracts are a big part of the crypto space that lets people create their own applications to run on the blockchain. Smart Contracts also allow the creation of new tokens on the blockchain.  Anything DeFi related is due to the use of Smart Contracts. They allow us to run decentralized applications, create tokens on the blockchain, mint NFTs, and do even more complicated things that you can learn about in our specific Smart Contracts video. 

Binance Smart Chain

Around 2 years later, Binance got around to it and created a second blockchain that had smart contracts and called this one “Binance Smart Chain”. This is a big misunderstanding for new users, including me, that there are actually two chains, the “Binance Chain” and the “Binance Smart Chain”, and if you accidentally send your crypto on one chain not knowing this, you can easily lose funds. Oh by the way, instead of starting from scratch and setting up new smart contracts, Binance just forked Ethereum’s code so they could have the same features, but with a few changes that made it faster and cheaper. In the developer world, forked is a term that means they copy and pasted Ethereum’s code, then made their own changes. 

To achieve faster speeds and cheaper transactions, they had to give up some decentralization, which we’ll get to later. Copying most of Ethereum’s code also meant that developers could move their projects from Ethereum to the Binance Smart Chain without rewriting much of their code. 

BNB Consensus Model

For the rest of this video, we will be talking only about the Binance Smart Chain. The consensus model that this smart chain uses is Delegated Proof of Stake. Essentially, the top 21 people staking the most coins get to decide which transactions get approved and which get blocked. If you want to earn staking rewards without owning a few million dollars of BNB, you can even delegate your coins to a top validator and they’ll share their rewards with you. This is quite centralized, but allows for those cheaper fees I mentioned earlier and more transactions per second. Also, if you have no idea what staking is, you can watch our video on the proof of stake method, it seems to clear up a lot of misunderstandings. 

The binance smart chain is so much cheaper than Ethereum that practically anyone can make hundreds of transactions without spending more than a dollar. On Ethereum, the average transaction can cost $3 up to over $50, and way higher for complex smart contract usages. To put this is a simpler way, anyone can create their own token very affordably on the BSC. This means malicious developers and scams started to pop up all over the place.

PancakeSwap was the first popular decentralized exchange that allowed people to swap one token for another, and early users were able to create their own tokens and advertise them on sites like Reddit. Many of these were scams, and since this is the decentralized world, nobody was held accountable. BNB still has many unique use cases as it is a faster and cheaper version of Ethereum, but other ‘copycat’ blockchains have come along as competition. Polygon, for example is very similar, but many early users of Polygon learned from their mistakes on BSC, like me. 

The Tokenomics of BNB

There was initially 200,000,000 BNB coins minted. Half of them were sold through an ICO in July of 2017 for 15 cents each, raising around $15 million. Another 40% were given to the founding team, with around 20% vested each year, this means they don’t get them all at once, only so much per year. The last 10% were given to angel investors. 

One thing that is very interesting about BNB coin is that the Binance company actually buys them back each quarter. Every 3 months, they take 20% of all the profit of Binance and use it to buy back tokens, then burn them forever. This decreases the supply, which should theoretically raise the price, and I think this is a really cool idea, passing profits from the company through the blockchain to their coin. They will do this until the supply goes from 200,000,000 to 100,000,000 total coins. 

There are also many uses of the BNB coin. The best one is probably that you can save on trading fees when using the Binance exchange. They have other marketplaces where you can get discounts on monthly services and electronics if you pay with BNB. Notably, one I have heard before is Canva, which is a design mockup website that I have personally use, didn’t know you could use BNB to pay for that. There are even travel benefits to owning BNB, which I won’t get into here but thought was interesting. 

One last thing, Binance is incorporated in the Cayman Islands, and they also have a and Binance.US website which offers different services to US users and international users. I am excited for the day when it really doesn’t matter what your geolocation is and everyone can use crypto fairly. 

Thanks for watching, we hope you enjoyed this video, we really hope you learned something, and most of all, we hope to see you in our next video!

About the author 

Whiteboard Crypto Team

We are a team of blockchain enthusiasts dedicated to creating high-quality resources for anyone wanting to learn about the space. In fact, what inspired us was our grandparents - they didn't understand crypto. We aim so create all our content so that even they can understand it!

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