Since the launch of Binance’s native blockchain for their decentralized exchange, BNB has migrated to a new blockchain called Binance Chain. BNB acts as the fuel for the whole Binance Chain and Binance ecosystem — given that transaction fees are paid for in BNB for a variety of applications — as well as a means for an investor to enjoy various discounts and promotions on Binance’s products. We show the key metrics for BNB below (Fig. 1).
Notably due to the use of a token burn mechanism — wherein a certain amount of BNB is burned and removed from the crypto asset’s total circulating supply, based on the number of tokens (in USD dollars) equivalent to 20% of Binance’s proceeds raised from its trading volume.
Whilst, like any financial asset, BNB’s value at any point is driven to an extent by speculation and changes in wider crypto-market conditions, the crypto asset is also closely tied to significant developments in Binance and the company’s range of products — such as Binance’s early rise to prominence during the initial coin offering bubble, the launch of Binance Chain, its token burns, and the increasing non-exchange-related use cases for BNB. In general, Binance is well positioned to continue its strategy of expanding into avenues such as futures, margin trading, lending, fiat-crypto on-ramps, and stablecoin-related initiatives. We believe that Binance is well placed to eventually succeed in a number of these verticals. Given BNB’s key value driver is the success of Binance, the crypto asset is also well placed to benefit from Binance’s continued dominance.
However, it should be noted that Binance and BNB also shoulder a number of noticeable risks, any one of which could negatively affect the success of both. Most noticeably, Binance and BNB are vulnerable to some degree of regulatory risk due to Binance’s wide range of listings, the regulatory status of BNB in the United States, and roadblocks they could face with their fiat-crypto on-ramps.