Binance Coin: Analysis and Evaluation

Binance rating

Is Binance Coin (BNB) the next bitcoin? Rating agency Weiss Ratings found that idea worthy of exploration.

The price of the native currency of the Binance exchange exploded at the beginning of 2019. Its use cases solid and its backing more than impressive, BNB seems to have plenty of upside potential.

Binance Coin will likely not replace bitcoin as the market trend-setter, but it still deserves a closer look through the eyes of the cautious blockchain investor. Here are a few things to know about the digital coin.

  • Binance Coin is about to rob Litecoin of its 6th spot in the digital currency market cap rankings.
  • BNB is a utility token as well as a pseudo-security. As such, it creates some regulatory uncertainty.
  • The coin is used primarily for trading and other fee discounts at Binance. It also works as a standalone digital currency.
  • It recently moved from ETH blockchain to Binance Chain.
  • It is also the native currency of decentralized exchange Binance DEX.

It is quite impossible to assess BNB without the Binance exchange. In fact, the entire Binance ecosystem has to be considered. That is where most of Binance Coin’s power and monetary value originates, after all.

BNB is a utility token. It grants its users benefits such as lower fees within the Binance ecosystem. It does not offer exclusive access to Binance services though.

However, BNB holders gain indirect exposure to the performance of a company. In that sense, the token qualifies as a security. This exposure results from Binance’s plans to use revenue to buy back and burn 50 percent of the available supply of BNB.

(See the article Equity Tokens vs. Security Tokens: What’s the Difference? for further clarification on security tokens.)

Here are some additional items to consider when evaluating BNB as an investment opportunity.

The Market: Binance Coin Will Serve a Massive Market

  • BNB’s primary use case revolves around the trading fees users of the Binance exchange incur. It provides discounts on all fees within the Binance ecosystem. It is indispensable for the updated launchpad service of the operator.
  • Scores of online merchants already accept it as a standalone digital currency. Without a doubt, BNB has found utility outside the Binance cocoon. Thus, the value it provides for its users has tremendous, theoretically unlimited upside. (For instance, more than 200 Australian merchants accept the token through TravelbyBit alone.)
  • Binance traders and launchpad projects are the primary users of the token for now. The composition of the market it might serve in the future is as diverse as bitcoin’s.
  • Binance observes a KYC policy. The coin-to-coin nature of the exchange can keep it out of the crosshairs of regulators. It is also true that Binance’s move to Malta was prompted by legal crackdowns in Japan, Hong Kong, and China.
  • The dual (utility token/pseudo-security) nature of BNB may draw regulatory scrutiny, however.

Competitive Advantage: BNB’s Advantage Is Obvious

  • Originally an ERC20 token on the Ethereum blockchain, Binance Coin recently moved to Binance Chain, its very own blockchain. In the process, it gave up some degree of decentralization. Binance encourages BNB users to convert their ERC20 BNB to BEP2 (Binance Chain) tokens as soon as possible.
  • Binance’s biggest natural competitor is Coinbase. The mentioned move from the ETH blockchain to Binance Chain, though, may have made a BNB competitor out of ETH itself.
  • Binance’s ability to access key networks and players in the altcoin markets is peerless.

The Team: The Binance Management Team Is a Bona Fide “Supergroup”

  • The Binance team meets the definition of the all-star “supergroup”. CEO Changpeng Zhao is something of an industry celebrity, one with more than enough clout to never be considered a mere talking head. The backgrounds of the other core team members are just as impressive.
  • Additionally, the technical experience of the crew is unquestionable. Binance’s reputation is testimony to the integrity and scrupulous honesty of the team behind the brand.

BNB Token Mechanics: A Mixed, but Promising Bag

  • A digital currency exchange does not need to use a dedicated blockchain and a native digital currency to offer discounts. In this regard, BNB and Binance Chain may feel like bolt-on components of the ecosystem.
  • Binance Coin will, however, play a major role in Binance’s planned decentralization. It will be the main currency of Binance DEX. Its “secondary” use cases have already outgrown its initial scope as well.
  • BNB adds a new type of value to the blockchain industry, through its existing and planned use cases. A decentralized digital asset exchange like Binance DEX may prove to be a genuine game changer.
  • Only 200,000,000 BNB tokens will ever exist. Of these, Binance will burn 50 percent, leaving a total supply of 100,000,000 available in the future. This mechanism props up the price of the token, beyond the value that Binance’s ecosystem delivers. The company uses its cash flow to buy back the BNB it plans to burn.
  • BNB was never a truly decentralized digital asset. Its issuer retained a significant amount of its total supply. With the move to Binance Chain, decentralization suffered yet another setback.
  • Binance has paired BNB with bitcoin, USDT, and most of the altcoins it supports. Also, tradable BNB pairs are featured by 22 other digital asset exchanges.
  • The BNB product is already functioning and in an advanced state of adoption.

User Adoption: BNB Adoption Surpasses Expectations

  • Binance Coin may not fit the digital currency mold to a T but it is as easy to buy, store, and spend as any other virtual coin.
  • With Binance behind its wheel, BNB is much more likely to succeed than most other altcoins. Indeed, some already see it challenging bitcoin’s dominance.
  • As the Binance ecosystem continues to expand, so does its brand awareness. BNB is set to be a central piece of this ecosystem.
  • With its price hitting all-time highs every couple of weeks, Binance Coin is generating more and more buzz. Needless to say, Binance’s social media footprint is huge. The impressive rate at which it onboards new users is perhaps even more relevant than its social media portfolio.

The Bottom Line

No, BNB is probably not the next bitcoin. It is a solid digital asset, however, and its immense upside may indeed make it one of the best investment vehicles in the digital currency space. To complete your own analysis of BNB, why not use our peer-reviewed Blockchain Investor Scorecard?

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