The crypto space is incredibly competitive. Today, we will discuss one of the most successful cryptocurrency projects that consistently ranks among the top 3, Binance coin. In this review we will highlight all the factors that got Binance to where it is today and consider its future potential.
This review will be a very useful tool for anyone who wants to invest in cryptocurrencies but is still unfamiliar with the altcoin space. Let’s find out how does Binance work and if you should invest in Binance!
What is Binance Coin?
Before asking the question should I buy Binance, we should first get a firm grasp on the evolution of the platform. Binance is a centralized exchange platform that launched after an initial coin offering funding mechanism in June of 2017. The project was spearheaded by Chinese born, Canadian-immigrant Chengpeng Zhao, a finance genius who goes by the name CZ. The charismatic founder cut his teeth working for numerous fintech and online stock trading platforms before discovering the budding world of cryptocurrencies and the value that it could contribute to the world. He became the CTO of what would later become one of the most popular Chinese exchanges, OkCoin. The experience he garnered in these formative years drove him to start his own cryptocurrency trading platform which would ultimately become Binance.
The project was funded through a mechanism called an initial coin offering (ICO) in which early investors could buy Binance at a certain price before the asset was publicly traded. Binance raised over $15 million with their ICO. Binance Coin or BNB was created to serve as the ecosystem token that would provide benefits for users within the Binance ecosystem such as reduced transaction costs when using BNB as a trading pair, voting rights on new listings and exclusive access to other initial coin and initial dex offerings that were launched on the Binance blockchain. Initially, the Binance coin was launched on the Ethereum blockchain, but it soon became apparent that Ethereums’ congested network and high fees were becoming an impediment to wider adoption of cryptocurrency.
In one of CZ’s most genius moves, he decided to fork the Ethereum network which runs on a proof-of-work consensus algorithm that prioritizes decentralization. So, how does Binance work by contrast? CZ realized that not everyone cares about decentralization and thus the Binance chain is based on a proof-of-authority consensus mechanism algorithm which is much more centralized, however this centralization has the benefit of high throughput while still maintaining relatively high security. This bet payed off big-time as people Binance trading took-off and BNB became one of the top performing cryptocurrencies between 2020 and 2022.
Binance has gone from strength to strength and currently holds the prestigious title of processing the highest transaction volume of any exchange, by this metric it is the largest exchange in the world. The popularity of the project exploded as Binance was one of the platforms that offered the widest variety of cryptocurrency assets. The popularity of the exchange greatly contributed to the success of the Binance coin as people would buy Binance to get other advantages on the platform. In the next section we will investigate some of the mechanics that helped to drive up the price of Binance coin.
What makes BNB valuable?
BNB, or Binance Coin, is the native token on the Binance ecosystem. It has a deflationary supply tokenomics which is achieved through a buyback and burn program whereby the Binance foundation uses its profits to buy Binance Coins and permanently remove them from circulation as a digital asset. By systematically lowering the supply of BNB the theory is that the remaining tokens will accrue value.
This deflationary tokenomics mechanism was rather controversial at first to protect digital assets. Some believe this is an artificial way to pump up the price with no connection to utility which may result in price appreciation in the short term but may hurt the chain in the long run as major sell-off events follow. Advocates of BNB believe it is an ingenious method to keep people invested in the ecosystem as people are incentivized and rewarded when they do not sell for long periods. Interestingly a number of high profile cryptocurrencies have followed in Binances footsteps by implementing similar deflationary tokenomics systems. Ethereum and Luna are two examples of cryptocurrencies that have also adopted some token burning system.
We have already touched on the utility of the token within the Binance ecosystem. Using BNB in trading pairs lowers transaction costs, gives holders voting rights on new listings and gives holders early investment privileges into initial coin offerings and dex offerings. These factors plus the deflationary tokenomics are the primary reason people expect to see price appreciation in the long run and with a biometric authentication crypto service, you can look forward to transacting with peace of mind.
One should also consider that as the space grows and more people begin trading, Binance is the largest exchange and will likely be the first place new traders find to start trading. This network effect will certainly count in Binance’s favor in the coming years. Investors realize this potential and may buy Binance for this very reason. Binance trading is very simple and that makes it very attractive for newcomers.
Binance was the subject of a phishing attack in which millions of dollars were stolen from the clients of the crypto giant. The instance was a security breach in May of 2019 in which a hacker stole $40 million worth of Bitcoin by accessing the two-factor authentication information and API data from multiple users. This hack remains a blight on the private key crypto’s reputation. Binance is far from being the first cryptocurrency exchange to be hacked, in fact, exchange hacks are quite a common occurrence within the cryptocurrency space. This is why Vaultavo created its Biometric Smart card which allows for safe and convenient cold storage which keeps your crypto assets easily accessible.
Fortunately, due to Binance’s success they were able to financially reimburse the victims of this exploit. This act undoubtedly won back some favor for Binance within the community, as not all exchanges are able to reimburse clients for exploits. But these risks are ever present when it comes to centralized exchanges and we would like to warn all readers that once you buy Binance or any other cryptocurrency, it is best to remove it from an exchange which has a much larger attack surface and instead place your crypto assets in cold storage. Next time Binance might not be able to reimburse the victims of a hack but could bolster their service with fingerprint authentication crypto. We should add that Binance specifically has been quite an important support system for the crypto community; when the Ronin network which supports the Axie Infinity crypto gaming and NFT platform was hacked in for $600 million in March of 2022, Binance invested $150 million into Ronin to help it recover.
Binance realizes the that bad optics such as hacks and exploits inhibit broader adoption and thus it seems as though they have made it their mission to support the crypto ecosystem at large. Crypto trading is already made to look dodgy by mainstream media, although this perception is beginning to change as the success of crypto companies are enabling them to become advertisers on mainstream networks which enables them project a more positive image for the industry. This is part of CZ and Binance’s broad appeal despite its lack of decentralization which is normally considered a top priority within the crypto space, their unwavering support makes them an ally and commodity to the space.
Binance regulatory concerns
Binance has been criticized for not meeting the KYC and AML requirements in many countries and its wide range of cryptocurrencies includes certain tokens that are banned in certain countries like the USA. It is due to regulatory concerns such as these that the primary Binance exchange was banned in the US in 2019. An alternative version of the exchange known as Binance US which limits certain features like leveraged trading and has more stringent KYC and AML requirements was launched so that it could comply with all US laws. In 2021 Binance received warnings from the UK, Japanese and Thai governmental financial oversight bodies who warned Binance that it is not fully compliant to operate in these jurisdictions and was ordered to cease Binance trading.
These announcements had negligible impacts on the Binance price performance, perhaps because there is an assumption that trading will continue once Binance complies with regulatory requirements. Binance has on numerous occasions indicated its desire to comply with regulatory bodies and to assist in the identification of bad actors who attempt to use Binance trading for money laundering or other nefarious activities. Binance has become an ambassador for the cryptocurrency space at large and we hope that they will continue to best represent the members of this community by complying with domestic laws and regulations. They are an important gateway for many into the world of crypto and it would be a major loss for those countries if their citizens lost access to Binance trading and the ability to buy and use crypto assets.
Will decentralized exchanges make Binance redundant?
Does the rise of decentralized exchanges threaten the continued success of Binance? Blockchain technology is supposed to be about decentralization after all. Our team agrees that there will likely be room for both decentralized and centralized entities in the space. A major concern regarding decentralized exchanges is that governments may prevent wallets such as Metamask which are used to interface with decentralized exchanges may be banned from conventional app stores. A move like this would likely bolster BNB and other centralized exchange coins. This will severely hinder wider adoption of decentralized exchanges. Centralized exchanges are much easier to regulate and tax once KYC and AML conditions are met which may prove to be highly profitable and advantageous to governments, thus their continued success is less dubious.
If decentralized exchanges are allowed to continue their operations inhibited we still believe that there will be enough people who prefer the easy user interface and custodianship of centralized exchanges to justify their existence. A more likely existential threat to the likes of Binance is competition and the success of crypto itself. Other centralized exchanges such as Kraken, Kucoin, FTX and Crypto.com are catching up fast and could chip away at Binance’s market cap. It is unlikely that Binance will fall under such hard times that it will cease to exist in the next 5-10 years, but its price action could be weak if users flock to the competition.
Future outlook and market sentiment
Currently, you can buy Binance at 40% below its previous all time high of $690. Compared to other top 10 coins such as Cardano and Solana, Binance has held its price quite well during the recent downturn, this may be indicative that Binance’s deflationary tokenomics have been quite effective at maintaining an upwards price pressure despite a market sell off. The sentiment in the cryptocurrency market at the time of writing leans bearish. This comes in a macroeconomic environment characterized by economic sanctions against Russia, the Ukrainian war, high inflation, high gas and oil prices, Chinese Covid lockdowns, etc. All of which have seen investors moving away from risk-on assets and flocking to safer asset classes and commodities. We’d rather protect digital assets and embrace the future of fingerprint authentication crypto.
The private key crypto market as a whole is still considered highly risky and is renowned for its volatility, it should therefore not be surprising that there was a major sell of in this asset class. If Bitcoin continues to show weakness, we would caution against Binance trading as Bitcoin tends to be a leading indicator for the rest of the market. If you do want to buy Binance at this point we recommend DCA (dollar cost averaging) instead of placing a big bet, as there is likely extreme volatility ahead. DCA leaves dry powder for more investment should the price suddenly prop precipitously.
We hope this review has provided you with a clear understanding of the Binance project, its pros and cons and how you can go about Binance trading. Binance remains one of the most popular exchanges but the competition exchange space is heating up fast.
We believe Binance’s network effects will keep it in the top 10 for the foreseeable future barring major exploits among digital assets. Whether or not you decide to buy Binance, be sure to consult Vaultavo’s range of cryptocurrency reviews so you can learn how to never lose private keys and all about biometric authentication crypto.
Binance Trading FAQs
Where can I buy Binance?
Binance is itself a cryptocurrency exchange. If Binance is a registered crypto exchange in your region this may be the best place for you to buy Binance. There are some exchanges that do not allow for Binance trading because Binance is a competing centralized exchange and they believe supporting the BNB token may be detrimental to their own business model. If you are not able to access the Binance exchange you can look on Coinmarketcap for the exchanges that allow Binance trading by clicking on the Binance icon and then clicking on markets.
What does Binance Coin do?
Binance Coin is a cryptocurrency that can be understood as a digital utility token within the Binance ecosystem. There are only a certain number of Binance coins and there is a certain demand for these digital tokens as they are required to fulfill certain actions on the Binance exchange and wider ecosystem. It can be used to lower transaction fees, vote on new listings on the exchange and gives you exclusive access to invest in new projects that launch on the Binance Smart Chain. If a large number of people buy Binance thereby removing a portion of the circulating supply the value of remaining coins in circulation should theoretically go up. This makes many people believe that Binance Coin could also serve as a store of value asset in the long run. Binance (the exchange) also systematically repurchases its own coins and burns the supply in order to increase the value of the remaining coins.
Are Cryptocurrencies a scam?
No. Just as there are publicly traded companies that are later revealed as frauds or crowdfunding ventures that overpromise and underdeliver, the cryptocurrency space also has fraudsters and failed start-ups but that not mean the industry as a whole is a scam. Cryptocurrencies have blockchain technology at their core which is a truly revolutionary and useful tool that numerous companies and entities are experimenting with, some of these will change the world of finance while others fail or fade into obscurity as did many of the internet stocks during the Dot Com bubble. We are still in the early stages of blockchain adoption and thus we must closely watch the space to identify potential winners.