Binance Coin

  • Cryptoasset Report
  • December 3, 2018

Binance Coin is the native token on the Binance exchange, a major exchange known for its extensive cryptoasset inventory and trade volumes.

Overview

Binance Coin (BNB) is the native token on the Binance exchange. Short for ‘Binary Finance,’ Binance’s name refers to crypto-only exchanges’ continually increasing importance. In particular, Binance aims to improve on existing centralized exchange infrastructure through stronger liquidity, security, an international focus, and an agile approach to regulatory compliance. Known for its cryptoasset inventory’s extensive depth, the platform plans to ultimately support margin, futures, and decentralized (on-chain) trading. As of mid 2019, Binance is the world’s largest exchange by volume. While the details of Binance’s security system have been kept secret, the platform follows industry best practices, including ISO/IEC 27001:2013 and the CryptoCurrency Security Standard (CCSS). In addition, the trading system supports an order-making peak load of 1.4 million transactions per second. While Binance was launched without significant KYC/AML procedures, it formed a partnership in early 2019 with provider IdentityMind to boost compliance and data security. Other partnerships with Chainalysis and Refinitiv similarly aim to maintain compliance.

Asset Details

While trading fees can be paid in other cryptocurrencies, payment via the ERC-20 BNB token activates a tiered discount structure, with first-year discounts of 50% on trading fees. This discount will halve each year until 2021, when BNB will not grant discount rights. Functionally, this process requires users to hold BNB in their account when making a trade. Before the discount, Binance charges a 0.1% trading fee as well as an exchange withdrawal fee, though the BNB discount does not apply to the later. Binance Coins can also be used to pay for votes in Binance’s community coin forum — a process that helps determine the next cryptoasset added to the platform, though Binance retains a veto right.

In order to drive value to the token, Binance conducts a quarterly buyback of BNB, utilizing 20% of exchange profits. These tokens are subsequently burned, and auditable records of this process are recorded on chain. Binance aims to buy back 50% of the total token supply over time, in order to create a form of price support among early adopters and align incentivizes of token holders and platform users. BNB redeemed for trading fee discounts is included in this buyback figure. BNB is also a primary trading pair on the exchange, offering considerable inter-market liquidity.

The corporate entity was founded in Hong Kong in 2017 by Changpeng Zhao, the former CTO of OKCoin, and relocated to Malta in 2018. Following this relocation, Binance formed a partnership and equity stake with Founders Bank, aiming to establish a fiat on-ramp. Other emergent ventures include a security token exchange platform in a partnership with Neufund and the Malta Stock Exchange and a local exchange in Uganda offering cryptocurrency access to unbanked populations. Binance Labs is the incubation arm of Binance, making early investments in the Terra stablecoin and privacy application incubator Oasis Labs. The BNB token was distributed through a mid-2017 token sale, which raised $15 million in a public sale for 50% of the total supply.