Binance Coin: A Closer Look Into the Future

A Look Into Binance’s Business Development

Starting off as just a spot cryptocurrency exchange, Binance has been developing its business in a number of directions ever since. In this, it has been acting more aggressively than any other of its competitors in the blockchain industry. In 2019, it launched over 20 major products, significantly outpacing the development of the other major digital currency venues: Coinbase, Kraken, Bitfinex, Poloniex, Bittrex, Gemini, Bitstamp, itBit, and bitFlyer. 

Binance’s strategy aims at developing something much bigger than a crypto exchange: it is competing to be one of the builders and the centerpiece in a new global, open financial system. The ecosystem currently offers spot, futures and options trading; an opportunity to use leverage, trading and lending in the community, which provides its users novel cross-selling opportunities, unmatched in the industry. For example, traders can use a single account to maintain collateral requirements in their options, futures and spot dealings. Furthermore, Binance automatically stakes its clients’ assets and credits their accounts with the yield. This practise incentivizes users to keep their assets custodied in Binance, which in turn allows for their swift operations without the need for funds to be unstaked and transferred to another venue. The resulting synergy attracts even more liquidity to the Binance exchange.

By combining cross-selling, flexible utilization of funds to cover margin requirements across different asset classes, its proprietary blockchain-based decentralized exchange (DEX), and a native token, Binance is providing its customers unique network effects. It is reasonable to expect that the company will soon start offering services typical for the legacy banking system, including but not limited to: interest-bearing deposits, loans and various payment channels. 

Utility Tokens

The definition of a utility token is a crypto digital token issued with the purpose of funding the development of the cryptocurrency. The former can be utilized at a later stage to buy services and goods offered by the cryptocurrency’s issuer. Some of the biggest crypto exchanges are employing utility tokens to fund the development of their projects and give value to their users. Binance makes no exception in this respect.

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Binance Coin (BNB)

The initial purpose of the Binance coin was to pay fees at a discounted rate on the Binance exchange. However, its utility soon started to grow exponentially. Within the ecosystem, the coin can be used for various services. Apart from paying fees on the Binance DEX, it can be used to take part in token sales in Binance Launchpad. Users can also grow their BNB holdings and exchange them for fiat through Binance Lending. BNB’s utility outstretches the Binance ecosystem by far, as the company has been continuously entering into strategic partnerships. TravelbyBit and, for example, allow you to pay your travel and hotel bills in this token, while Propy gives individuals the chance to buy real estate. The built-in apps of the latest flagship Samsung and HTC smartphones allow Binance coin to be stored.

With a rapidly expanding use of the coin, Binance has been increasing its burn rate. The 10th quarterly BNB Burn took away more than 2.2 million tokens, worth $38.8 million, out of circulation. This is the second biggest burn in USD terms and third biggest in BNB terms; also the fourth consecutive month of increase in the burn rate. The company explained this tendency was a result of the growth rate in its margin trading segment, the enhanced accessibility for crypto purchases, and other services. The increasing burn rate is more than good news for BNB investors, as it serves as an anti-inflationary mechanism, thus protecting the value of the crypto asset of their choice.

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April 15, 2020