Binance is a leading cryptocurrency exchange that provides trading for >100 different cryptocurrencies. Currently, the exchange provides both spot and margin trading and is considered to be the largest cryptocurrency exchange in the world in terms of trading volume. Accordingly, the token powering the Binance ecosystem, Binance Coin (BNB) now ranks #6 in terms of market cap. The unprecedented success of Binance can be attributed to the notable team, market timing and product impact.
The Power of CZ
It’s hard to talk about Binance without mentioning their stellar CEO, Changpeng Zhao (a.k.a CZ). Before launching the exchange, he built trading systems and led the technical teams at OKCoin and Blockchain.info. He’s also known for his frequent activity and responsiveness on Twitter; always keeping the community updated when there are issues.
Market Timing & Strategy
Binance grasped the opportunity to acquire users rapidly in Q3 2017. The timing was excellent as Chinese exchanges were under pressure to relocate, while market momentum was on the rise.
– Regulatory arbitrage by being registered in Malta
– Crypto-to-crypto trading only to avoid issues from banking
– User incentives (referral program + exchange token, BNB)
The Utility of BNB
In the beginning, BNB was simply a way for the exchange to raise money with limited utility. Over time, we are seeing continuous efforts by the team to create value for BNB holders.
Users enjoy a 25% discount when BNB is used for trading fees. Having a higher BNB balance also qualifies users for higher tier trading fee discounts:
BNB is burnt quarterly according to the overall trading volume. As of writing, Binance has completed the 8th BNB Coin Burn, reducing 6.23% of the total supply. Eventually 50% of total BNB supply will be destroyed. Additionally, the team has given up their BNB allocations; the tokens will be contributed to an additional burning event.
Binance Launchpad is platform for crypto projects to sell their tokens and raise capital. Currently, users’ BNB balances are recorded for eligibility to participate in the Launchpad events. Demand so far has been very high, providing strong returns for IEO participants.
Binance launched its decentralized exchange in Q2 2019; this platform allows for trading while users have full control of their funds. Fees associated to the DEX are charged in BNB.
Goods and services can be purchased using BNB. Notable partners include Crypto.com (VISA card) and PundiX (payment terminal for merchants).
In May 2019, Binance was hacked and lost 7000 BTC (worth about $40 million). In most cases, this would’ve brought an exchange to closure. But CZ took this opportunity to show the world Binance is here to stay.
Binance took full responsibility for the hack and covered the losses from the insurance fund, SAFU (Secure Asset Fund for Users). The exchange also conducted a BNB giveaway to further give assurance to users. Within a week, BNB’s price fully recovered.