Binance Coin (BNB) review: How does it work? Is it worth investing in?

The world of cryptocurrencies is dominated by Bitcoin (BTC) and Ethereum (ETH). But what lies outside of the Big Two? Now you’re entering the territory of alternative cryptocurrencies. These can be roughly grouped into three types:

• Stablecoins, like Tether (USDT)
• Memecoins, like Dogecoin (DOGE)
• Utility coins, such as Binance Coin (BNB)

Of the three cryptos listed above, Binance Coin (BNB) has the highest value. But what makes it so? In this article, we dig deep into the history of Binance Coin’s (BNB) — what it’s all about, why it exists, and its historical value.

Binance Coin (BNB)’s price chart since its start

Unlike Bitcoin and Ethereum, both of which have seen peaks and valleys of sorts since their inception, Binance Coin (BNB) has been relatively stable.

To put things into context, Binance Coin (BNB)’s price hovered around $20 for much of its lifetime until the cryptocurrency boom in March 2021. 

Binance Coin (BNB)’s value peaked on May 10, 2021, at an all-time high of $915. Coincidentally, Bitcoin (BTC)’s value was around $77,000, and Ether (ETH)’s value was around $5,200 on the same day.

Binance press officials still aren’t exactly sure why Binance Coin (BNB) mooned so much in that time frame, but it’s widely believed that Binance’s business moves, architectural changes to its blockchain network, and its competitor, Coinbase, doing a direct listing onto the stock market made Binance Coin’s value skyrocket.

Today, Binance Coin (BNB)’s value — along with Bitcoin (BTC)’s and Ether (ETH) — has dropped significantly since their peak.

While BNB isn’t a runaway crypto success, it’s notable for its relative stability and accessible price compared to its more famous counterparts. Altcoins like these are worth considering to investors looking to diversify their cryptocurrency portfolio.

ALSO READ: Hackers steal $41 million worth of bitcoin from Binance cryptocurrency exchange

What is Binance Coin (BNB)?

But beyond its historical performance, what is Binance Coin, really? Of all the altcoins out there, why is it the most popular?

Binance Coin (BNB) initially started out as a way to pay for trading fees on the popular Binance crypto exchange ecosystem.

If you were to trade cryptocurrencies on the Binance International Exchange, you’d be charged a 0.1 per cent trading fee. However, by using Binance Coin (BNB) to pay for trading fees, you would receive a 25 per cent discount, as the screenshot below shows:

Binance makes it very clear that BNB is strictly a “utility coin”, meant for use within its closed garden. Unlike, say, Bitcoin, Binance Coin isn’t meant to overthrow traditional fiat currency or decentralise entire portions of the economy.

What else is Binance Coin (BNB) used for?

Apart from paying for Binance trading fees, Binance Coin (BNB) can now be used to:

• Pay for trading fees on Binance DEX (Decentralised Exchange)
• Pay for transaction fees on the Binance Chain
• Pay for transaction fees on the Binance Smart Chain
• Pay for goods and services for both online and in-store purchases (e.g., using Binance Card or Binance Pay)
• Pay for hotel and/or flight bookings and more at Travala.com
• Usage as a community utility token on the Binance Smart Chain ecosystem (such as games and DApps)
• Participate in token sales hosted on the Binance Launchpad
• Donate on Binance Charity
• Provide liquidity on Binance Liquid Swap

For most of us, Binance Coin (BNB)’s most applicable uses would be to pay for trading fees on the Binance International Exchange, pay for goods and services using the Binance Card or Binance Pay, or pay for hotel and/or flight bookings on Travala.com.

That being said, the Binance Card and Binance Pay system is not yet available in Singapore.

Can you use BNB on Binance Singapore?

It’s worth noting that BNB works as a payment method on Binance International Exchange — but NOT on Binance Singapore. You cannot use Binance Coin (BNB) on Binance Singapore to pay for your trading fees at this point in time.

Binance Singapore offers something called a Binance Cash Wallet, but that’s a totally different thing from Binance Coin. The Binance Cash Wallet is like any other e-wallet — basically a way for you to store Singapore Dollars on the platform.

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You still need to pay the 0.6 per cent trading fees in SGD.

However, you can buy and sell Binance Coin (BNB) on Binance Singapore’s crypto exchange, and then use it to trade on the Binance International Exchange.

You would then transfer your newly acquired Binance Coin (BNB) from Binance Singapore to Binance International to take advantage of the lower trading fees.

Do note that this process is somewhat roundabout and incurs two types of transaction fees — the 0.6 per cent trading fee from buying Binance Coin (BNB) with Singapore Dollars, and the 0.001 BNB fee for transferring from Binance Singapore to Binance International.

How does Binance Coin (BNB) retain its value?

Binance Coin (BNB) uses a hybrid of a supply cap (much like Bitcoin) and a coin sink (much like Ethereum).

Cryptocurrency	Price	Market cap	Circulating supply	Supply cap
Binance Coin (BNB)	~$470	~$70 billion	153.4 million BNB	200 million BNB

Binance Coin (BNB) has a hold on its value by using a supply cap. Binance has also implemented a Quarterly Burn system to keep Binance Coin (BNB) scarce and its transaction fees relatively stable as compared to Ethereum’s ever-rising transaction fees.

Binance plans to burn a total of 100 million Binance Coins (BNB) — to date, 30 million Binance Coins (BNB) have already been burnt.

Should you buy Binance Coin as an investment?

The short answer is: no, Binance Coin isn’t an investment in and of itself.

You should only buy Binance Coin (BNB) if you want to trade cryptocurrencies on Binance International to take advantage of its lower trading fees, or want to transact in any part of the Binance ecosystem.

Binance is very clear on its stance towards Binance Coin (BNB) being a utility token, and intends it to be used as such.

As mentioned earlier, should you choose to take this step, the cheapest way to buy Binance Coin (BNB) with Singapore Dollars is through Binance Singapore and then transferring it to Binance International.

Although this process incurs two types of transaction fees, it’s still cheaper and can be easily done with just SGD.

Otherwise, you’d either need a multi-currency account to fund your Binance International account, or look for a compatible credit card (not recommended as it incurs an extra one per cent fee on top of the bank’s 3.25 per cent forex transation fee anyway).

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All that said, you shouldn’t write-off every single altcoin as worthless except within its own ecosystem.

Each crypto has different purpose (and thus potential) and needs to be assessed individually.

Once again, we’ll end our crypto article with a disclaimer that cryptocurrency is a highly volatile form of investing, regardless of which coin you buy!

So always do your due diligence before buying and invest no more than you can afford to lose.

Make sure to also diversify your portfolio well with traditional investments like stocks, ETFs and REITs via online brokerages in Singapore.

This article was first published in MoneySmart.