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About Binance Coin (BNB)
BNB (Binance Coin) reached its all-time high of $686.31 on May 10, 2021, according to CoinGecko, due to the growing popularity of decentralized applications, including DeFi, on the Binance Smart Chain. The Binance Smart Chain, now rebranded as BNB Chain, is a layer 1 network that supports other applications and provides faster and cheaper transactions than Ethereum, though it is more centralized.
BNB is required to pay transaction fees on the Binance Smart Chain, contributing to its growth and price increase. Binance has both a centralized and decentralized exchange built on the Binance Smart Chain. As of May 2022, Binance is ranked fourth largest cryptocurrency in the world after Bitcoin, Ethereum, and Tether.
BNB was created during an initial coin offering in July 2017, with 100 million BNB sold and another 100 million held by the founding team and angel investors. Binance plans to reduce the circulation of BNB by buying and removing 20% of its profits every quarter, leading to a lower circulation of BNB tokens and higher token value.
Transaction fees on the Binance Smart Chain burn a portion of BNB tokens in real-time, with most BNB burning done quarterly according to a formula based on BNB price and validated blocks. In the first quarter of 2022, over 1.8 million BNB were burned.
The Binance Smart Chain (BNB Chain) operates on a proof-of-stake authority (PoSA) consensus mechanism where a limited group of large stakers, currently 21, validate the transactions. This approach enables the system to offer faster and cheaper transactions than Ethereum, which uses a proof-of-stake mechanism that requires participants to stake 32 ETH and has a larger pool of validators. The PoSA mechanism makes the BNB Chain more centralized. The BNB token was created for Binance users to access discounts on trading fees by paying with the token, with discounts ranging from 10-25%. It now serves as a token for staking on the BNB Chain and as a governance token that enables holders to have a say in the project’s decisions. BNB also has a unique feature where lost tokens can sometimes be reclaimed and redeemed for new BNB, under certain conditions. This applies to tokens worth more than $1,000 but less than the planned “burn” volume, lost due to honest mistakes.
