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What is the Token Economics of BNB
This post covers the (1) Binance Ecosystem (2) Issuance & Emission, and (3) Utility of BNB.
Token economics (tokenomics) studies the design and implementation of blockchain-based tokens. Understanding token economics is crucial for anyone considering investing in or using a particular token.
This post covers the token economics of BNB.
1. Binance Ecosystem
Binance started off as a crypto exchange in 2017. Today, it is the biggest player in the crypto industry.
The Binance ecosystem includes:
Binance.com - the original and largest crypto exchange by volume.
Binance.us - which was created after Binance was banned in the US in 2019 on regulatory grounds.
Binance DEX - a decentralized exchange built on Binance Chain.
Trust Wallet - a popular mobile wallet acquired by Binance in 2018.
CoinMarketCap - a popular source for crypto news & tracking.
BNB Beacon Chain - which is optimized for fast decentralized trading but lacks smart contracts and strong programmability.
BNB Smart Chain - which runs parallel to the original chain, has smart contract functionality, and is compatible with the Ethereum Virtual Machine (EVM).
BNB Sidechain - which is a framework for creating sidechains in the BNB Smart Chain ecosystem.
BUSD - a US dollar-backed stablecoin issued jointly by Binance and Paxos.
2. Issuance & Emission
Token issuance is the creation and distribution of tokens as part of a specific event or offering e.g. airdrop, ICO, reverse ICO, IEO, IDO, DAICO, ETO, STO, and SAFT. Token emission is the ongoing process of creating and releasing new tokens into circulation e.g. through mining or staking.
BNB is a deflationary token with a non-programmatic burn and a maximum supply of 200 million.
Binance Coin (BNB) was issued as part of Binance's initial coin offering (ICO). Binance pre-mined 200 million BNB. The distribution process was:
Founders received 80 million BNB vested over 4 years.
Investors received 20 million BNB with no vesting or lock-up restrictions.
The public sale distributed 100 million BNB.
Binance regularly burns BNB and plans to continue this till 100 million BNB are burned.
Tokens derive value from the utility of the network that they are used in. In other words, the value of a token is determined by how useful it is within the specific ecosystem in which it is used. This can be based on a variety of factors, such as:
the size and activity of the network,
the demand for the goods & services that can be purchased with the token, and
the perceived value of the network to its users.
As the utility of the network increases, the value of its associated tokens is likely to increase as well.
Use cases of BNB:
The first use case was discounted trading fees on the Binance exchange.
It is a medium of exchange on the Binance platform, where it can be used to pay for trading fees, listing fees, and other fees.
It can also be used to buy and sell other cryptocurrencies on the Binance platform and is often used as a base currency for trading.
It can be used to participate in token sales on the Binance Launchpad platform, which is a platform for launching and selling new blockchain-based projects.
It can also be used to access premium features and services on the Binance platform, such as exclusive access to certain trading pairs.