Binance USD: the lesser-known stablecoin

Everyone knows about USDT and USDC, the two main stablecoins circulating through the global blockchain. They are a vital part of decentralized finance and the crypto economy in general, providing a touch of stability in the sea of fluctuation that is the crypto market. Binance USD (BUSD) is another, newer stablecoin.

It was originally created for Ethereum, but it was also very quickly launched on Binance Chain, the company’s own network. As such, it can be used as a native token on both Ethereum and Binance. It doesn’t just mean you can buy it there. You can also use it in development and blockchain’s inner workings.

Stablecoins defined

Stablecoins are a separate breed of cryptocurrencies. They are tokens that are usually collateralized by fiat currencies or other assets. As a result, their own value precisely copies that of their underlying assets. In this case, like with other popular stablecoins, these assets are United States dollars.

BUSD is identical in value to USD, meaning that you can always exchange one for the other with a minimal difference, minus service fees. It stays on this level because for each BUSD issued on the blockchain there is a dollar held somewhere in the bank account. It means they are always pegged to a specific asset.

This unchanging value (in relation to USD) can be hugely beneficial. Since they remain cryptocurrencies in technological terms, they can still be used freely on the blockchain. At the same time, they don’t follow the usual principles of a crypto market. They can be counted upon for stability, and security, and to hold a certain value over time.

BUSD background

BUSD was created in 2019 as a joint project of Binance and Paxos, a crypto-oriented company. Binance provided technology, infrastructure, and development, while Paxos provided a large portion of the project’s financial backing. Much of the collateral used to maintain BUSD is owned by Paxos.

The token was first launched on Ethereum. The reason is that Ethereum was even then the primary location for decentralized finance, aka DeFi. It’s a sector of the crypto economy that focuses on banking—loan-giving, interest-building, financial transactions, e-commerce widgets, etc.

BUSD in DeFi

Ethereum has long been essential for DeFi because it was the first to introduce smart contracts back in 2014. They are programmed, automated algorithms capable of performing an action with the resources given to them when their requirements are met—all automatically.

It allows Ethereum-based devs to create sprawling, self-sustaining systems with a high degree of sophistication. Decentralized banking was essentially possible only after smart contracts came about. That’s why BUSD was initially launched on Ethereum, as well. It just makes sense for a finance-oriented asset like this stablecoin to be there.

It was also later issued on Binance Chain, possibly because it was sufficiently tested on Ethereum and Binance liked the result.

BUSD characteristics

BUSD isn’t as popular as two other stablecoins you’ve heard of: USDT and USDC. These two are always in the top-5 currencies by market cap. BUSD, meanwhile, is more like top-25. It’s still not bad, but the problem is that it tried to enter the niche that was already occupied by USDC.

BUSD has two main standards: BUSD ERC20 and BUSD BEP20. The former is Ethereum’s variety, while the latter is found on Binance Chain. They have their differences, but the main principles are the same throughout the networks. It is a stablecoin pegged to USD. On both networks, it can be used as a native token alongside these systems’ original tokens (Ether and Binance Coin, respectively).

What is BUSD used for?

The two standards can be used on Ethereum and Binance Chain for development, to run operations, fuel smart contracts, and in applications and decentralized finance. It’s not the same as buying or selling currencies on exchanges because coins you buy on Binance Exchange can’t be used to develop apps on Binance.

BUSD, on the other hand, can be used to this end on both Binance and Ethereum. It’s very beneficial for developers and users because you can actually pay with BUSD on applications, stores, and financial providers if they support this token. The reasons you might want these coins instead of ETH and BNB are:

• BUSD never changes its value, which makes it ideal as a development instrument.
• BUSD can be used on both Ethereum and Binance seamlessly.
• BUSD can be used to a great extent in decentralized finance.
• BUSD is widespread enough on Binance Chain, especially in dApps and DeFi.

ETH and BNB aren’t bad inherently, but stablecoins are much better for development and use in decentralized solutions. These might be applications that also run on cryptocurrencies or decentralized finance providers, which need a supply of stable money. That’s why BUSD isn’t bad at all.

Why BUSD?

BUSD isn’t much different from USDC or USDT. They all aren’t that different from one another because there isn’t much a stablecoin can do differently from other stablecoins. They are all collateralized in one way or another in USD, they all maintain the same constant value, and they have largely the same uses.

The only big difference is in the area of application.

• Tether USDT is present on Bitcoin, Ethereum, and many other networks, but it’s not that widespread on Ethereum.
• USD Coin is very prevalent on Ethereum and present on some other networks.
• Binance USD is present on Ethereum and Binance Chain, but it’s mostly overshadowed in the former, while being popular enough in the latter.

As such, using BUSD on Binance is quite reasonable, but it can also be used pretty comfortably as a multi-chain token. Ethereum has plenty of dApps, DeX, and DeFi solutions that support BUSD. In addition, it’s widespread on Binance Chain, which means you can use the same token in two places without having to switch to USDC.

At the same time, however, USDC is available in a limited capacity on Binance Chain and Binance Smart Chain, which could make BUSD redundant. However, it depends largely on individual providers and what currencies they support. As an independent developer, however, it’s all just personal preference.