At Crypto Explained, we are on the mission of making crypto easy for everyone.
If you benefit from this, and value the effort, make sure to subscribe to receive our weekly Newsletter directly in your email!
Changing the tone a little bit, today we are doing a project deep dive.
I’ve previously covered most of the top cryptocurrencies by market cap, but Binance has been the missing one, so I’ll bring an overview of what you need to know about it.
Let’s get started!
A Quick Intro…
Binance was founded in early 2017 by Changpeng Zhao, commonly knowns as CZ, who is also the CEO.
Around mid 2017, Binance went through an ICO (initial coin offering) and raised around $15M.
CZ claims this is the only funding they have ever received.
By early 2018 has become the largest crypto exchange by trading volume and has maintained this position ever since.
BNB is Binance’s native asset. Post the rebrand, it changed the original name from “Binance Coin” to BNB, which stands for Build and Build.
In terms of technology, Binance came a long way. Let me recap:
BNB, Binance's official coin, was originally created as an ERC20 token on Ethereum when it first launched back in 2017.
Since then, Binance has developed its own blockchains: Currently its ecosystem is composed of 2 blockchains and is collectively known as BNB Chain.
The BNB Beacon Chain (formerly known as Binance Chain), was launched in 2019.
This blockchain is built using Cosmos SDK, effectively making it aProof of Stake blockchain
with limited smart contract functionalities.The second blockchain was launched in 2020: the BNB Smart Chain (formerly known as the Binance Smart Chain).
It is a fork of EVM (Ethereum’s Virtual Machine), which means applications developed on Ethereum can easily migrate and/or launch in BNB Smart Chain as well.
With the launch of BNB Smart Chain, Binance provided a much faster and cheaper fee option to developers and users. However, this is achieved by a high centralization: Binance chain runs on a delegated Proof of Stake consensus model, with only 21 validators in the network
.
Binance Ecosystem
Binance has a robust ecosystem, anything you can think of, seems like they are already doing something there.
Here is a quick list:
Binance exchange: starting with the flagship product, the leading centralized crypto exchange in the world.
BNB Smart Chain: a smart contract platform that we just described above.
Binance Launchpad: an exclusive token launch platform for entrepreneurs to launch their crypto projects.
Binance Labs: it’s essentially fund that focuses on incubation and investment on blockchain proejcts.
Academy: an open-access learning hub
Charity: a not-for-profit foundation dedicated to advancing blockchain-enabled philanthropy and global sustainable development.
Research: provides research reports, data-driven insights, and analysis for investors in the crypto space.
But these are just some of the things Binance is doing.
In terms of ecosystem being BUILT on Binance, there are many more applications.
The only call out here is that given the very affordable fees, anyone can build on BNB Smart Chain, which means that you will by definition find more scammy or low quality projects.
Having said that, there are also a lot of interesting stuff being built.
Now, let’s talk tokenomics
BNB is the official coin for the whole ecosystem.
In the last bull market, it has reached the top 3 cryptocurrencies by marketcap, only behind BTC and ETH.
Right now, even with the bear environment, it is still solid as top 5.
It is a utility coin, used for different things, such as:
token farming to participate in token sales
payments across different industries: payment, travel, entertainment, service, finance… and not necessarily in the crypto space.
trading fees discounts.
It has an initial supply of 200M, which is distributed in the following way:
50% was sold through ICO at 15 cents each, raising around $15M,
40% went to the founding team with 20% vested each year,
the final 10% went to angel investors.
BNB Burning
What is worth noting about BNB tokenomics, is that Binance’s goal is to burn this 200M coins to half of the initial supply.
To do this, the original mechanism was to buy back the coins on a quarterly basis
: every 3 months, Binance invested 20% of all profit to buy back BNB and burn them.
Because of this, you can notice a price bump every quarter.
This was done all the way till December 2021.
Post that, the auto-burn was introduced:
essentially the blockchain would make adjustments to the amount to be burnt based on the price and blocks generated.
To date, around 36M coins have been burnt across both mechanisms, and this will continue till 100M have been burnt.
Why do they do this, you ask? To reduce the supply, which will strengthen the price of BNB.
Is this too much manipulation? Good question, particularly considering the distribion of BNB is pretty centralized…
This is probably one of the reasons why regulators investigate Binance.
What is CeDefi?
CeDeFi is a term coined by Binance CEO CZ when the company launched the BNB Smart Chain.
It stands for “centralized decentralized finance”
, and it basically means that Binance enables users to experiment with DeFi products like decentralized exchanges (DEX), liquidity aggregators, yield farming tools, lending protocols, via an easier user experience, at a much cheaper transaction fee.
The trade off? Well, it’s hosted on a centralized blockchain, so that means you are sharing the custody of your assets with Binance.
It’s not necessarily a good or bad thing, this will depend on your preferences. It’s just something you should know if you choose to experiment with this.
If you are new to the concept of custody and impact, here is a useful article for you!
That’s it for today! Thanks for making it this far! If you enjoyed it, make sure to like, subscribe and share, so more people can find us!