What is BNB, also know as Binance Coin (BNB)?

In this article we will go in depth on what BNB, also known as Binance Coin, is and how it works. BNB, which was launched in 2017 as a so-called "utility token" on the Binance exchange, is currently number four on the list of the world's largest cryptocurrencies based on market value.

You can easily both buy and sell BNB at Firi.

BNB is the cryptocurrency of Binance, the world's largest crypto exchange. BNB was originally used as an incentive to get the crypto community to participate in Binance's Initial Coin Offering (ICO). Here, Binance promised lower trading fees to customers if they used BNB as a means of payment. Since then, BNB has evolved to play a central role in Binance's fast-growing ecosystem, and the cryptocurrency is today known as Binance Coin.

Despite the fact that BNB is developed and issued by Binance, it does not entitle investors to dividends from Binance's profits. BNB does not represent an investment in the crypto exchange Binance, but rather in the relatively decentralized ecosystem BNB Chain, which was developed by Binance. In the same way that ETH is the currency in the Ethereum ecosystem, BNB is the currency that belongs to the BNB Chain.

Did you know that?

The name "Binance" is a combination of the two words "bitcoin" and "finance".

According to Binance CEO Chanpeng Zhao, BNB is short for “Build ´N Build”. He has tweeted that "BNB stands for "Build the community, and let the community build, build, 'n build".

What is BNB used for?

Investment: Although Binance states that BNB does not represent an investment in the Binance company itself, it is still possible to invest in the BNB cryptocurrency.
Paying transaction fees: On Binance Smart Chain, BNB is used to pay for transaction fees.
Securing the network: Validators stake BNB to help secure the network.
Lower trading fees on Binance: Holding BNB can give users discounts on trading fees when using the Binance exchange.
Payment method: Merchants can choose to accept BNB as payment – for example, for hotels and flights on selected websites.
Collateral for loans: BNB can be used as collateral for loans on certain crypto lending platforms.
Participating in Initial Coin Offerings: Binance has developed Binance Launchpad, a platform for new ICOs. You can use your BNB to buy tokens in upcoming cryptocurrency projects.

Firi explains: What is an Initial Coin Offering?

An Initial Coin Offering (ICO) is the crypto industry’s version of an initial public offering (IPO). A company that wants to launch a new token, dApp, or service can initiate an ICO to raise capital. Interested investors can participate in the ICO and receive the new cryptocurrency issued by the company. The cryptocurrency may serve a specific function related to the product or service the company offers, or it may simply represent ownership or a stake in the company or project.

How to buy and store BNB?

An easy and cost-effective way to buy and store BNB is through a cryptocurrency exchange like Firi. Firi makes it simple to buy, sell, and securely store your BNB and other cryptocurrencies.

When you create an account with Firi, a BNB wallet is automatically generated for you. In practice, this means that Firi safely holds your cryptocurrency on your behalf.

You can access your BNB wallet by logging in with your email or Vipps and verifying your identity using BankID. You can easily send and receive BNB to and from your Firi wallet using other exchanges or BNB wallets.

Another option is to store your BNB yourself. The official wallet for holding BNB is Trust Wallet, but there are also other wallets that support BNB.

The background history of BNB

Here is a timeline of how BNB has evolved:

2017: Binance and BNB are born
BNB is launched through an ICO and initially exists as an ERC-20 token on the Ethereum network — known as BNB ERC-20.
2019: Binance launches its own blockchain called Binance Chain (BC)
Today, this blockchain is known as BNB Beacon Chain. Binance Chain was created to support Binance’s vision of decentralized trading.
BNB is launched as a native coin on the Binance Chain network.
Users receive this new BNB coin in exchange for their old BNB ERC-20 tokens in what is called a token swap.
2020: Binance launches Binance Smart Chain (BSC)
This blockchain allows for smart contract functionality and is designed to run in parallel with Binance Chain to avoid reducing BC’s efficiency.
2022: Binance introduces BNB Chain
This is a merger of Binance Chain and Binance Smart Chain.
Binance Chain is renamed to BNB Beacon Chain, and Binance Smart Chain becomes BNB Smart Chain.
BNB Chain, short for "Build N’ Build Chain", is a distributed blockchain network where developers can build decentralized applications (dApps). It plays a central role in the transition to Web3.
BNB — which now stands for Build and Build (formerly Binance Coin) — functions as the gas token that powers transactions on BNB Chain.

A Deeper Dive Into the History

BNB was launched through an Initial Coin Offering (ICO) held from June 26 to July 3, 2017 — eleven days before the Binance exchange went live. Investors could buy 2,700 BNB for 1 ETH or 20,000 BNB for 1 BTC.

At launch, a total of 200,000,000 BNB tokens were created:

40% went to the Binance team
10% to angel investors
50% to the ICO sale

All 100 million ICO tokens were sold, raising $15 million. According to Binance, the capital was used as follows:

35% for platform and system development
50% for marketing
15% for emergency reserves

BNB was originally issued as an ERC-20 token on Ethereum but could later be exchanged for the native BNB coin through a token swap. Binance Chain’s mainnet launched on April 18, 2019, but it became clear that Binance wanted to offer more functionality through a blockchain more similar to Ethereum — especially the ability to run smart contracts, which BC could not support.

As a result, Binance Smart Chain was launched in September 2020, running parallel to Binance Chain and offering expanded features.
In February 2022, BNB Chain was introduced as a unified structure combining Binance Chain and Binance Smart Chain.

BNB Burn

As stated in Binance’s whitepaper, Binance uses 20% of its quarterly profits to buy back and burn BNB tokens. This means the tokens are permanently removed from circulation and cannot be recovered.

This is somewhat similar to stock buybacks in traditional finance, where a company uses profits to repurchase its own shares from the market, often increasing the share price (all else being equal).

According to the whitepaper, Binance will continue these quarterly burns until 100 million BNB tokens — 50% of the total supply — have been permanently destroyed.

Whether this practice is good or bad is debated. On one hand, it limits supply, which can support the token’s value. On the other hand, increasing demand combined with decreasing supply could lead to a supply squeeze, potentially driving prices — and thus transaction fees — higher. This may push developers and users to seek more affordable alternatives.

Firi explains: What is a DEX?

A DEX, or decentralized exchange, is a peer-to-peer marketplace where transactions happen directly between users, without any intermediaries. These transactions are facilitated by self-executing agreements written in code, known as smart contracts.

DEXes deliver on one of the core promises of the crypto industry: enabling financial transactions without the need for banks, brokers, or other middlemen.

Some of the most popular DEXes today include Uniswap on the Ethereum network and PancakeSwap on Binance Smart Chain.

Learn More About BNB’s Different Blockchains

BNB Beacon Chain (formerly Binance Chain)

In 2019, Binance launched Binance Chain to support its vision of decentralized trading. Alongside Binance Chain, the Binance Decentralized Exchange (DEX) was also introduced. At the time, the DEX market was plagued by poor user experiences and clunky interfaces. Binance aimed to change that by applying the winning formula from its centralized exchange — an intuitive interface and optimized UX. In addition, they focused on achieving sub-second transaction confirmation times for trades on the platform.

Binance Chain is fast, generating new blocks in under a second, but its functionality is limited. The chain currently serves only one core purpose: powering Binance DEX. It also uses a consensus mechanism called Tendermint-BFT, which allows Binance to maintain full control over the blockchain without involving the broader community.

BNB Smart Chain (formerly Binance Smart Chain)

Launched in 2020, about a year and a half after Binance Chain, Binance Smart Chain (BSC) is a smart contract platform similar to Ethereum and other blockchains.

When BSC launched, Binance was racing to capitalize on the growing DeFi and NFT wave. They explained that upgrading Binance Chain would compromise its speed and efficiency, so they chose to launch a parallel blockchain instead. This decision mirrors challenges Ethereum faced, like during the CryptoKitties congestion in 2017.

Binance Smart Chain was built to enable developers to create smart contracts with added compatibility with Ethereum. Since Ethereum's code is open-source, Binance was able to fork it — meaning copy the base code — while introducing their own adjustments. One major difference was choosing a Proof-of-Staked-Authority (PoSA) consensus mechanism instead of Ethereum’s earlier Proof-of-Work.

PoSA allows for much faster performance:

A new block is created every 3 seconds
Transaction fees are significantly lower than on many competing blockchains

One key distinction of Binance Smart Chain is how validators are rewarded. When a validator processes a block, they earn the transaction fees users pay — there is no new BNB minted as a reward. Instead, existing BNB is used.

Despite BSC’s popularity, it has not fully solved the blockchain trilemma — the challenge of achieving decentralization, security, and scalability all at once. Its low fees and fast block times come at the cost of decentralization and, arguably, security. The number of active validators is limited to 21, and only the top 21 holders with the most staked BNB can participate in validation. While BSC allows participants to take part in validation and governance — unlike Binance Chain — Binance still retains significant control through its role in selecting validators.

BNB Chain

BNB Chain — short for Build N’ Build Chain — is a distributed blockchain network where developers can build decentralized applications (dApps). It represents a merger between the previously separate Binance Chain and Binance Smart Chain. You can read more about each of those chains above.

Binance uses the term MetaFi to describe the broader purpose of BNB Chain — combining the meta-ecosystem with finance. MetaFi is an umbrella concept that includes DeFi, GameFi, SocialFi, Web3, and NFTs.

This is the Cryptocurrency Exchange Binance

Binance is a leading cryptocurrency exchange that was founded in Hong Kong in 2017. The company was started by Changpeng Zhao (CZ), who still serves as CEO. Before founding Binance, CZ launched Fusion Systems in 2015, a company that built high-frequency trading systems for stockbrokers. He also worked as CTO at crypto exchange OKCoin, giving him strong experience in both trading platforms and the crypto industry.

Today, Binance is one of the largest crypto exchanges in the world by trading volume and has evolved into one of the biggest ecosystems in the crypto space. Over the past few years, Binance has launched a DEX (decentralized exchange), two blockchains, a peer-to-peer trading platform, a crypto lending service, an ICO platform, and much more.

Lasse Schultz23/02/2023

Should not be considered financial advice. Crypto may involve high risk.