What is BNB?
- Cryptalyses
- Mar 11
- 13 min read
A Deep Dive into Binance’s Native Cryptocurrency BNB (Build and Build)
Cryptocurrency has evolved beyond simple digital cash, giving rise to powerful ecosystems that fuel decentralized applications, financial services, and blockchain innovations. Among these, BNB (Build and Build) stands out as one of the most influential cryptocurrencies, originally launched as Binance Coin in 2017 by Binance, one of the world’s largest cryptocurrency exchanges. What started as a utility token for reducing trading fees on Binance has since transformed into the backbone of BNB Chain, a multi-purpose blockchain network supporting smart contracts, DeFi (Decentralized Finance), NFTs, gaming, and more.
Over the years, BNB has gained prominence as a top 5 cryptocurrency by market capitalization, solidifying its place as an essential part of the crypto industry. With its unique burn mechanism, low transaction costs, and growing ecosystem, BNB continues to shape the blockchain landscape, offering investors, developers, and users a robust platform for innovation. This guide will explore the history, technology, use cases, and potential future of BNB, providing a comprehensive understanding of its role in the ever-evolving world of cryptocurrency.
You can read BNB's white paper here: BNB White Paper
The Birth of Binance and Binance Coin
The origins of BNB (Binance Coin) are closely tied to the rise of Binance, one of the most dominant cryptocurrency exchanges in the world. Binance was founded in 2017 by Changpeng Zhao (CZ), a developer and entrepreneur with a background in high-frequency trading systems and blockchain technology. Prior to founding Binance, CZ had already made a name for himself in the crypto space, having served as the Chief Technology Officer (CTO) of OKCoin, a leading exchange at the time, and having developed Fusion Systems, a company specializing in trading system solutions for Wall Street firms. His deep knowledge of both finance and technology positioned him well to launch a competitive crypto trading platform.
The Vision Behind Binance
Binance was created to solve several key problems that traders and investors faced on existing exchanges:
Slow and Inefficient Trading Platforms – Many early cryptocurrency exchanges were plagued with performance issues, high fees, and slow transaction processing times. Binance aimed to build a high-speed, user-friendly exchange that could handle millions of transactions per second.
High Trading Fees – Traditional exchanges charged relatively high fees per trade, making frequent trading costly. Binance introduced its native token, BNB, to offer discounts on trading fees as an incentive.
Limited Token Selection – Many exchanges had a small number of supported cryptocurrencies. Binance set itself apart by rapidly listing a wide variety of digital assets, appealing to a global user base.
The Initial Coin Offering (ICO) of BNB (July 2017)
To fund the development and expansion of Binance, CZ and his team launched an Initial Coin Offering (ICO) in July 2017, one of the last major ICOs before regulatory scrutiny significantly increased in the space. The ICO was highly successful, raising $15 million within just a few weeks.
Total BNB Supply: 200 million BNB
Tokens Sold in the ICO: 100 million BNB (50% of total supply)
ICO Price: $0.10 per BNB
Funds Allocation:
35% for platform development
50% for branding, marketing, and ecosystem growth
15% for emergency reserves
Investors who participated in the ICO were early adopters who recognized Binance’s potential as a high-speed, low-cost trading platform. Many of them were rewarded handsomely as Binance quickly became the largest cryptocurrency exchange by trading volume, and BNB’s price surged over the years.
The Early Use Case of BNB
At launch, BNB had a very specific function: it was designed primarily to reduce trading fees on the Binance exchange. Binance users could pay trading fees in BNB instead of Bitcoin (BTC), Ethereum (ETH), or other cryptocurrencies, receiving a discount that decreased over time as follows:
Year 1 (2017-2018): 50% discount on trading fees
Year 2 (2018-2019): 25% discount
Year 3 (2019-2020): 12.5% discount
Year 4 (2020-2021): 6.25% discount
Year 5 (2021 and beyond): No discount
This mechanism incentivized adoption of BNB, as active traders had a compelling reason to hold and use the token.
BNB’s Early Performance and Market Adoption
Despite launching at just $0.10 per token, BNB quickly gained traction as Binance grew in popularity. Within its first six months, Binance became one of the top 10 cryptocurrency exchanges by trading volume. By early 2018, Binance was the largest exchange in the world, and BNB had risen to over $20 per token, delivering a staggering 200x return for early investors.
As Binance continued expanding, so did BNB’s utility. While its primary purpose remained centered on fee discounts, Binance began introducing new services that further integrated BNB into its ecosystem. This evolution laid the groundwork for BNB’s transition from a simple utility token to a multi-functional cryptocurrency powering an entire blockchain ecosystem.
This transformation became a reality in 2019 when Binance launched Binance Chain, allowing BNB to migrate away from Ethereum and onto its own blockchain. This marked a major milestone in BNB’s journey, setting the stage for its next phase of development as the native currency of Binance’s growing blockchain empire.
Transition from Ethereum to Binance Chain
BNB was initially launched as an ERC-20 token on the Ethereum blockchain in 2017, meaning it was subject to Ethereum’s transaction fees, congestion, and smart contract standards. However, as Binance rapidly grew, it became clear that relying on Ethereum posed scalability and cost limitations. To address these issues and create an ecosystem tailored to Binance’s needs, the company launched Binance Chain in April 2019, followed by Binance Smart Chain (BSC) in September 2020.
This transition from Ethereum to Binance's own blockchain ecosystem was a game-changing moment for BNB. It not only freed Binance from Ethereum's constraints but also allowed BNB to become the backbone of an entire blockchain ecosystem, much like how ETH powers Ethereum.
The Launch of Binance Chain (April 2019)
Binance Chain was the first proprietary blockchain developed by Binance. It was designed with speed and efficiency in mind, prioritizing fast transactions over complex smart contract capabilities.
Key Features of Binance Chain:
Focus on Trading – Binance Chain was built primarily to facilitate fast and decentralized token trading, especially for Binance’s decentralized exchange (DEX).
Simple Design – Unlike Ethereum, Binance Chain did not support complex smart contracts to maintain high performance and low latency.
BNB as the Native Token – BNB was migrated from Ethereum’s ERC-20 standard to Binance Chain’s BEP-2 standard, making it the native currency of Binance Chain.
BNB Migration from Ethereum (ERC-20 to BEP-2)
To transition from Ethereum, Binance initiated a token swap, where users could exchange their ERC-20 BNB tokens for BEP-2 BNB tokens at a 1:1 ratio.
This meant that users no longer needed Ethereum to pay for gas fees when using BNB.
All major exchanges, including Binance, facilitated the swap seamlessly.
However, Binance Chain had a major limitation: it lacked full smart contract functionality. While it was optimized for fast transactions and trading, developers looking to build DeFi applications, NFTs, and dApps still had to rely on Ethereum or other smart contract platforms. This created the need for a more robust blockchain solution, which led to the launch of Binance Smart Chain (BSC) in 2020.
Binance Smart Chain (BSC) – A Game Changer (September 2020)
Why Was Binance Smart Chain Created?
While Binance Chain was excellent for trading, it couldn’t compete with Ethereum’s smart contract capabilities. Binance needed a solution that:
Supported smart contracts and decentralized applications (dApps).
Had lower fees than Ethereum, which was experiencing high gas prices.
Was compatible with Ethereum to make it easy for developers to migrate their projects.
What is Binance Smart Chain (BSC)?
Binance Smart Chain (BSC) was launched in September 2020 as a parallel blockchain to Binance Chain.
Unlike Binance Chain, BSC fully supports smart contracts and decentralized applications (dApps).
It is compatible with the Ethereum Virtual Machine (EVM), meaning developers can easily port Ethereum-based projects over to BSC.
Transactions on BSC are faster and cheaper than on Ethereum, making it attractive for DeFi, gaming, NFTs, and more.
Key Advantages of BSC Over Ethereum
Feature | Binance Smart Chain (BSC) | Ethereum |
Consensus Mechanism | Proof-of-Staked-Authority (PoSA) | Proof-of-Stake (PoS) |
Transaction Fees | ~$0.10 per transaction | $10+ per transaction (with high traffic) |
Block Time | 3 seconds | ~12 seconds |
Smart Contracts | Yes (EVM-compatible) | Yes (EVM-based) |
Scalability | High (faster, lower costs) | Limited (high fees, congestion) |
BNB Migration to BSC (BEP-2 to BEP-20)
With the launch of BSC, Binance created a new BEP-20 version of BNB, which became the primary utility token for BSC transactions, similar to how ETH is used on Ethereum.
BNB’s Role on BSC
Gas Fees: BNB is used to pay transaction fees on BSC, just like ETH on Ethereum.
Smart Contract Utility: BNB is required for interacting with dApps and smart contracts on BSC.
Staking and Validation: BNB is used in Binance’s Proof-of-Staked-Authority (PoSA) consensus mechanism, where validators stake BNB to secure the network.
BSC quickly gained traction and became a major competitor to Ethereum, especially in the DeFi (Decentralized Finance) and NFT space. Many Ethereum-based projects migrated to BSC due to its lower fees and higher efficiency, including major platforms like PancakeSwap (a decentralized exchange).
The Evolution into BNB Chain (2022 – Present)
In February 2022, Binance rebranded Binance Smart Chain (BSC) and Binance Chain into a single ecosystem called BNB Chain to reflect a broader blockchain vision.
Why Was the Rebrand Necessary?
BNB was no longer just a "Binance" token. Binance wanted to separate the blockchain ecosystem from its exchange brand.
Decentralization Effort: Binance aimed to decentralize BNB Chain governance by involving more community participation.
Scalability and Expansion: The ecosystem had grown far beyond just trading, now supporting DeFi, NFTs, gaming, metaverse projects, and Web3 innovations.
BNB Chain Structure (Post-2022)
BNB Chain consists of two key components:
BNB Beacon Chain (formerly Binance Chain)
Handles governance, staking, and voting for the ecosystem.
Used for security and validator selection.
BNB Smart Chain (formerly Binance Smart Chain, BSC)
Supports smart contracts, DeFi, NFTs, and dApps.
Optimized for high performance and low fees.
With this evolution, BNB Chain became one of the largest blockchain ecosystems, rivaling Ethereum, Solana, and other smart contract platforms.
Impact of the Transition
The transition from Ethereum → Binance Chain → BNB Chain had major implications for BNB and the broader crypto industry.
1. Binance Became More Than an Exchange
Initially, BNB was just a utility token for fee discounts on Binance.
Now, BNB is the native asset of a multi-chain ecosystem supporting thousands of dApps, DeFi projects, and NFT platforms.
2. BNB Became a Serious Competitor to Ethereum
With lower fees, faster transactions, and EVM compatibility, BNB Chain attracted many Ethereum-based projects looking for a cheaper alternative.
Platforms like PancakeSwap, Venus, and BakerySwap exploded in popularity as alternatives to Uniswap and Aave on Ethereum.
3. Rise of DeFi and NFTs on BNB Chain
BNB Chain became a top destination for Decentralized Finance (DeFi) applications, competing with Ethereum, Solana, and Avalanche.
Binance launched Binance NFT Marketplace, allowing users to buy and sell NFTs using BNB.
4. Increased Demand for BNB
As more projects migrated to BNB Chain, demand for BNB skyrocketed.
By 2021, BNB hit an all-time high of $690, making it one of the most valuable cryptocurrencies.
The transition from Ethereum to Binance Chain to BNB Chain marked a strategic move that transformed BNB from a simple utility token into a core blockchain asset. This shift helped Binance expand beyond centralized exchange services and positioned BNB as one of the most important cryptocurrencies in the world.
Utility and Use Cases of BNB
Over time, BNB has expanded far beyond just trading fee discounts. Today, it plays a central role in the Binance ecosystem and beyond, including:
a. Transaction Fees
Used to pay transaction fees on Binance and BNB Smart Chain (BSC).
Offers lower transaction costs compared to Ethereum.
b. Smart Contracts and DeFi
BNB is widely used in Decentralized Finance (DeFi) protocols such as:
PancakeSwap (BSC’s largest decentralized exchange)
Venus (decentralized lending and borrowing)
AutoFarm (yield farming)
Supports NFT platforms, including Binance NFT Marketplace.
c. Token Burns and Deflationary Model
Binance regularly burns BNB tokens (removing them permanently from circulation) to reduce supply and increase value.
Originally, Binance conducted quarterly burns using 20% of its profits.
In 2021, Binance introduced the BNB Auto-Burn Mechanism, making burns more predictable and automated.
d. Payments and Real-World Use Cases
Used for airline bookings, shopping, crypto loans, and gaming.
Supported by Visa crypto debit cards and various merchants.
e. Staking and Governance
BNB holders can stake their tokens to earn rewards and secure the network.
Used in BNB Chain governance, allowing users to vote on proposals.
Challenges and Risks for BNB
Despite BNB’s rapid growth and strong ecosystem, it faces several challenges and risks that could impact its long-term success. These risks range from regulatory scrutiny and centralization concerns to competition from other blockchains and security vulnerabilities. Below, we explore the key risks facing BNB.
Regulatory Scrutiny and Legal Issues
One of the biggest threats to BNB and Binance is regulatory uncertainty. Governments and financial regulators worldwide are increasingly scrutinizing Binance, BNB, and the broader crypto industry.
a. Binance’s Legal Troubles
BNB is closely tied to Binance, and any legal actions against Binance can directly impact BNB’s price and utility. Binance has faced multiple regulatory investigations and legal actions, including:
U.S. SEC Lawsuit (2023) – The Securities and Exchange Commission (SEC) sued Binance, alleging that BNB is an unregistered security, which could lead to restrictions on its trading in the U.S.
CFTC Lawsuit (2023) – The Commodity Futures Trading Commission (CFTC) accused Binance of violating U.S. trading laws.
DOJ Investigation – The U.S. Department of Justice (DOJ) has investigated Binance for potential money laundering and sanctions violations.
Regulatory Bans – Binance has faced bans or heavy restrictions in countries like China, the U.K., and Canada, affecting BNB adoption.
b. Potential Impact on BNB
If regulators classify BNB as a security, it could face strict regulations in major markets like the United States and Europe.
Binance’s legal troubles could damage investor confidence, leading to price volatility or reduced adoption.
Binance might be forced to separate BNB from its ecosystem, limiting its use cases.
2. Centralization Concerns and Governance Risks
BNB Chain is often criticized for being less decentralized than Ethereum or Bitcoin, raising concerns about control and censorship.
a. Limited Validator Network
Unlike Ethereum, which has thousands of validators, BNB Chain operates using a Proof-of-Staked-Authority (PoSA) consensus mechanism, where only 21 validators are responsible for confirming transactions.
Critics argue that this makes BNB Chain more centralized, as Binance has influence over validator selection.
A small number of validators increases the risk of collusion, censorship, or network manipulation.
b. Binance’s Influence
Binance claims that BNB Chain is community-driven, but many suspect that Binance still controls major governance decisions.
If Binance faces regulatory shutdowns, it could severely impact BNB Chain’s development and governance.
c. Risk of Forks
If Binance’s influence becomes too controversial, developers might fork (split) the BNB Chain, leading to two competing versions of the blockchain.
3. Competition from Other Smart Contract Platforms
BNB Chain competes with Ethereum, Solana, Avalanche, Polygon, Cardano, and other blockchains offering smart contract capabilities, DeFi, and NFTs.
a. Ethereum’s Dominance
Ethereum remains the leading smart contract platform despite high fees. With the Ethereum 2.0 upgrade, it now uses Proof-of-Stake (PoS), reducing fees and improving scalability.
Many developers and institutions prefer Ethereum due to its security, decentralization, and long-term credibility.
b. Rise of Alternative Blockchains
Solana (SOL) – Offers faster transactions than BNB Chain with higher decentralization.
Polygon (MATIC) – Built as an Ethereum Layer-2 solution, offering low fees and compatibility with Ethereum’s ecosystem.
Avalanche (AVAX) – Known for fast transactions and subnets for custom blockchain networks.
Arbitrum and Optimism – Ethereum Layer-2 scaling solutions reducing Ethereum’s fees, making BNB Chain’s low fees less of an advantage.
c. Potential Impact on BNB
If Ethereum scaling solutions become dominant, fewer projects may migrate to BNB Chain, reducing BNB’s utility.
If developers prefer more decentralized networks, BNB Chain could struggle to attract innovation.
4. Security Risks: Hacks, Exploits, and Smart Contract Vulnerabilities
Like other blockchain networks, BNB Chain is vulnerable to hacks, exploits, and security breaches.
a. Past BNB Chain Hacks
BNB Chain has suffered multiple high-profile security incidents:
BNB Bridge Hack (October 2022) – A hacker exploited a vulnerability in BNB’s cross-chain bridge, stealing $570 million worth of BNB.
PancakeSwap and Venus Protocol Exploits – Some of BNB Chain’s largest DeFi protocols have been hacked due to smart contract flaws.
b. Risk of Smart Contract Bugs
Unlike Ethereum, BNB Chain has a faster but less rigorous auditing process for dApps.
Many DeFi and NFT projects on BNB Chain have been rug-pulled (fraudulent exits) due to low-quality smart contract security.
c. Centralization Increases Security Risks
Binance paused the entire BNB Chain during the 2022 hack, proving that it can control the blockchain – a security measure, but also a sign of centralization risk.
5. Tokenomics and Inflation Risks
a. Dependence on BNB Burns
Binance burns BNB to reduce supply and increase scarcity, helping maintain its value.
However, if Binance ever stops burning BNB due to regulatory or financial reasons, demand for BNB could decrease.
b. High Token Supply
With an original supply of 200 million BNB, even with burns, BNB remains a highly liquid token.
Unlike Bitcoin, which has a fixed supply of 21 million, BNB’s large supply could lead to inflation concerns.
c. Dependency on Binance Exchange
A large portion of BNB’s demand comes from Binance users paying trading fees.
If Binance ever loses market dominance or faces a shutdown, demand for BNB could plummet.
6. Environmental and Energy Concerns
While BNB Chain uses Proof-of-Staked-Authority (PoSA), which is more energy-efficient than Proof-of-Work (PoW) blockchains like Bitcoin, it still has higher environmental concerns than newer energy-efficient models.
Future climate regulations could impact blockchain projects, especially those perceived as less green.
7. Uncertainty About Future Developments
Binance frequently introduces new blockchain projects, and there is always a risk that BNB could be replaced by a newer technology.
If Binance shifts focus to another token or blockchain, BNB could lose relevance.
Should You Be Concerned About BNB’s Risks?
BNB remains one of the most successful and widely-used cryptocurrencies, but it faces serious challenges that investors and users must consider:
✅ Strengths:
Strong ecosystem, low fees, and Binance’s backing.
Popular among traders and DeFi users.
BNB burns reduce supply over time.
⚠️ Risks:
Regulatory pressure could classify BNB as a security.
Centralization concerns make it less decentralized than Ethereum.
Competition from Ethereum, Solana, and other smart contract platforms.
Security risks from hacks and smart contract exploits.
BNB’s value is tied to Binance’s success, which is uncertain.
BNB’s future will depend on how Binance handles legal challenges, decentralization, and competition. If Binance navigates these challenges well, BNB could continue to grow as a major blockchain asset. However, investors and developers should remain cautious of regulatory and security risks before fully committing to BNB Chain.
Final Thoughts: BNB’s Future in the Evolving Crypto Landscape
BNB has come a long way since its launch in 2017, evolving from a simple exchange token into the backbone of a thriving blockchain ecosystem. With its low transaction fees, smart contract capabilities, and growing adoption across DeFi, NFTs, and beyond, BNB remains a major player in the crypto space. However, challenges like regulatory scrutiny, centralization concerns, increasing competition, and security risks pose significant hurdles that could shape its trajectory in the years to come.
As with any cryptocurrency investment or blockchain project, staying informed is key. Whether you’re a trader, investor, or developer looking to build on BNB Chain, it’s essential to monitor Binance’s legal battles, network developments, and evolving market trends. The crypto space is fast-moving, and what holds dominance today might shift tomorrow.
At Cryptalyses, we continue to break down complex crypto topics with clear, insightful analysis to help you navigate this ever-changing industry. If you found this breakdown useful join the conversation in the comments below. What’s your take on BNB’s future—bullish, bearish, or somewhere in between? 🚀
Stay curious. Stay informed. Stay ahead. 🔍🔥
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