BinanceCoin BEP2 (BNB): origins, definition, and advantages
The cryptocurrency market has experienced remarkable growth and adoption since the inception of Bitcoin in 2009. It’s now evolved into a diverse ecosystem of digital assets, blockchain technologies, and decentralized applications. As the market matured, various cryptocurrency exchanges emerged to facilitate the trading of these digital assets.
Binance is still one of the most prominent and influential players in the crypto space. Founded in 2017 by Changpeng Zhao (CZ), Binance quickly rose to prominence due to its user-friendly interface, extensive selection of cryptocurrencies, and robust security measures.
BinanceCoin is their home token, released alongside their own native blockchain in 2017.
What is BinanceCoin (BNB)?
BinanceCoin (BNB) was introduced to the cryptocurrency world through Binance's Initial Coin Offering (ICO) in July 2017. BNB was initially created as an ERC-20 token on the Ethereum blockchain. During the ICO, Binance raised funds by offering BNB tokens to investors in exchange for various cryptocurrencies like Bitcoin and Ethereum.
The ICO was a resounding success, as Binance managed to secure the required capital to develop its cryptocurrency exchange platform. Following the launch, BNB became an integral part of the Binance ecosystem, designed to power various services offered by the exchange and beyond.
Utility within the Binance platform
BNB's primary function within the Binance platform is to serve as a utility token. As the native cryptocurrency of the Binance exchange, BNB plays a vital role in facilitating transactions and interactions within the platform. Binance traders can utilize BNB to pay trading fees, enjoying attractive discounts in the process.
By incorporating BNB in fee payment, Binance encourages users to hold and use the token, thereby increasing its adoption and overall demand. This has the dual effect of providing traders with cost-saving benefits while simultaneously bolstering BNB's value in the market.
BNB Burning Mechanism
One of the distinctive features of BNB is its deflationary burning mechanism.
Binance periodically conducts token burns, where a portion of the BNB supply is permanently removed from circulation. The burning process involves Binance using a percentage of its quarterly profits to buy back BNB from the market and then subsequently destroying those tokens.
The burning mechanism has a twofold impact on the token's value. First, it reduces the overall supply of BNB, increasing its scarcity and potentially leading to a rise in its price. Second, the regular burning process showcases Binance's commitment to maintaining the value and utility of BNB.
Introducing BNB Beacon Chain
The BNB Beacon Chain is a significant development in the Binance ecosystem, introduced as an extension of the existing Binance Chain. Launched in 2019, it represents a crucial step in Binance's journey toward blockchain scalability and interoperability.
The BNB Beacon Chain operates as a separate parallel chain, built on a Proof-of-Stake (PoS) consensus mechanism, in contrast to the Proof-of-Authority (PoA) consensus used in the original Binance Chain. Its primary purpose is to enhance the overall performance and utility of the Binance Chain ecosystem.
The Role of the BNB Beacon Chain
The BNB Beacon Chain plays a vital role in facilitating cross-chain communication and interoperability within Binance's ecosystem. As a PoS-based parallel chain, it enables efficient staking and validation of transactions, ensuring the network's security and integrity.
By enhancing scalability, the BNB Beacon Chain aims to address potential network congestion and latency issues that might arise as the Binance Chain's user base grows. This scalability upgrade ensures a smooth and seamless experience for users and developers interacting with the Binance Chain and associated applications.
About the BEP2 Protocol
The BEP2 standard is the main protocol behind the tokens on Binance Beacon Chain. All tokens issued here use this standard, which distinguishes it from other blockchains. Similar to other token standards, like ERC-20 on Ethereum, BEP2 tokens represent fungible digital assets that can be easily transferred and traded on the Binance DEX.
The BEP2 token standard serves as the foundation for various digital assets within the Binance ecosystem. Projects can create their own tokens as BEP2 tokens on Binance Chain to utilize its potential for fundraising, asset management, and trading purposes. BEP2 tokens are designed to be lightweight, enabling fast and efficient transactions on the Binance Chain.
Advantages
- Speed and Efficiency
BEP2 tokens benefit from Binance Chain's high throughput and low latency, enabling quick confirmation times and efficient transaction processing. This makes them suitable for high-frequency trading and other applications requiring fast settlement.
- Low Transaction Fees
The Binance Chain's consensus mechanism allows for low transaction fees, making it cost-effective for users to trade and interact with BEP2 tokens on the Binance DEX.
- Interoperability
Binance Chain's architecture allows for seamless interoperability between BEP2 tokens and other blockchains, promoting the integration of various decentralized applications and ecosystems.
Limitations
- Limited Smart Contract Functionality
BEP2 tokens are designed to be simple and efficient, but this simplicity comes at the cost of limited smart contract capabilities compared to more advanced token standards like ERC-20 or BEP20.
- Irreversibility of Transactions
Once transactions are confirmed on the Binance Chain, they are irreversible. While this enhances security, it can be a disadvantage in certain scenarios where reversibility is desired, such as resolving disputes or errors.
Conclusion
BinanceCoin BEP2 is one of the varieties of the regular BNB token, mainly used for the governance network called BNB Beacon Chain. It’s pretty much compatible with the original BNB, which uses the BEP20 protocol. These tokens, however, are different enough to justify their use as a utility token for this more scalable sort of BNB Chain.
