How BNB (Binance Coin) Works

BNB (Binance Coin) is a cryptocurrency that was introduced by the Binance exchange, initially as an ERC-20 token on the Ethereum blockchain, and later migrated to Binance's native blockchain network, the Binance Chain. BNB serves multiple functions within the Binance ecosystem and beyond, providing utility for users looking to optimize their experience within the platform. Here's a break down of how BNB works and its technical aspects.

Utility within the Binance Ecosystem

BNB is deeply integrated into the Binance ecosystem, providing users multiple ways to utilize it. One of its primary functions is to reduce fees for trading on the Binance exchange. When users opt to pay their transaction fees in BNB instead of the base currency being traded, they receive a discount. This encourages widespread adoption among traders looking to minimize overhead costs on their transactions. Although these discounts decrease over time, they remain a significant perk for frequent Binance users.

Beyond trading fees, BNB can be used for other services offered within the Binance platform, including:

• Payment for withdrawal fees on the exchange platform.
• Participation in Binance Launchpad events, which often require BNB stakes for users to participate in token sales for new projects.
• Payment for services within Binance's decentralized finance (DeFi) products and DEX trading fees on Binance DEX.

Burning Mechanism: How Supply is Controlled

One notable feature of BNB is its periodic “burn” process. Binance aims to reduce the total supply of BNB over time, with the goal of burning 100 million BNB tokens. This is done to create scarcity, as when tokens are "burned," they are permanently removed from circulation. Binance performs this process quarterly, using a portion of its profits to buy back BNB and burn it. Lower token supply theoretically adds more value to existing tokens by making them increasingly rare.

BNB Beyond Binance

Although Binance Coin was initially designed as a utility token for Binance’s own platform, it has also expanded for use beyond the exchange. BNB can be used as a payment method in different sectors, such as travel bookings, entertainment, and e-commerce, thanks to partnerships with payment processors and service providers. Developers also use BNB within decentralized applications (dApps) and other blockchain products, particularly on the Binance Smart Chain (BSC), which supports smart contracts.