The leading "exchange" token: what BNB has become famous for and what the future holds for it
Binance was one of the first centralized exchanges to launch its own cryptocurrency and an entire blockchain. In just a few years, the company has taken a leading position in the crypto market and has become a favourite of millions of users worldwide.
A brief history of Binance
Binance launched its crypto exchange in July 2017, and just 180 days after its launch, it became the largest exchange in the crypto industry. At that time, the company also launched its cryptocurrency, Binance Coin (BNB), as an ERC-20 token on the Ethereum blockchain. BNB gives holders discounts on trading commissions, access to tokensales, rewards for staking on the exchange, and other benefits.
The company has significantly expanded its product line over the years, launching services such as:
- Launchpad for tokensales (IEO) and token giveaways, which has seen the release of well-known projects Arkham, Stepn, Elrond, Matic and many others;
- Binance Labs incubator, which has supported such famous projects as Aptos, Polygon, Band Protocol, 1inch, Injective, The Sandbox, Harmony, Kava and dozens of others;
- Binance Academy;
- Binance Pay payment service,
- Binance NFT Marketplace;
- Binance Pool;
- Binance Charity, a non-profit charitable foundation.
In 2019, Binance broke new ground by launching its decentralized platform, Binance Chain, and introducing a new token issuance standard, BEP-2. After the launch of Binance Chain, the token migrated to its blockchain.
In 2020, the company launched another decentralized network, the Binance Smart Chain, which is very similar to Ethereum in address format, token standard (BEP-20), and architecture in general. However, this network had two key differences:
- Limited issuance. Ethereum does not have a limit on the amount of ETH. In addition, Binance burns tokens quarterly and will continue to do so until the total number of BNB is reduced to 100 million;
- Proof-of-Stake Consensus. The developers of the Binance Smart Chain decided to use the PoS mechanism instead of Ethereum's PoW to achieve faster transaction speeds and lower network fees.
In February 2022, Binance rebranded and merged its blockchains into a single BNB Chain ecosystem. The networks were also renamed BNB Beacon Chain and BNB Smart Chain (BSC). As a result, Binance became one of the largest centralized exchanges and one of the largest ecosystems in DeFi.
In August 2023, the Binance team launched the opBNB Tier 2 network, based on Optimistic Rollups technology used in Optimism's L2 network. This solution is designed to scale the BNB Smart Chain network. According to the developers' claims, the opBNB network processes more than 4,000 transactions per second, and their average cost is only about $0.001.
Binance's challenges and prospects
One of the main problems with the BNB Chain is its high degree of centralisation. Even though Binance has increased the number of network validators to 41, some experts believe that more than half of them are controlled in one way or another by the company itself. However, none has prevented BNB from becoming the fourth largest cryptocurrency by capitalisation after Bitcoin, Ethereum and Tether.
In November 2023, Binance introduced its own Web3 wallet, which was also grudgingly received by the community. The cryptocurrency wallet is based on the protocol for confidential computing (MPC), has cross-chain swap features and is integrated into the exchange's app, as another well-known exchange OKX had previously done.
However, users noted the controversial features of Binance Web3 Wallet, such as blocking transactions and freezing accounts, including sanctions evasion and the need to link the wallet to an exchange account. At the same time, the news of the launch of the new wallet hurt the TWT cryptocurrency, which is also under the wing of Binance.
In the second half of 2023, Binance's current problems were compounded by mounting pressure from regulators such as the SEC, FinCEN, and OFAC, eventually leading to CEO and founder Changpeng Zhao's resignation in November.
Due to these events, many users began to fear the future of the entire Binance ecosystem and its cryptocurrency, BNB. Despite the negative news and FUD around Binance, the price of BNB decreased slightly and almost recovered altogether.
Co-founder He Yee confirmed plans to transform the exchange, but details remain unknown. Analysts believe that the departure of the head of Binance will have almost no impact on the exchange. Other experts believe that the settlement of the conflict is a positive factor for further company development.
However, some believe that the heyday of Binance is ending, and the current events will lead to the fact that one part of users will now prefer other centralized platforms, fearing the consequences. The other — will move to DEX-exchanges. This is likely to affect the performance of the BNB Chain ecosystem as well.
Since November 2021, there has been a steady decline in BNB Smart Chain's TVL. This figure has fallen by more than 43% in the last year alone. The situation is exacerbated by BNB Smart Chain having many competitors that are as fast or even faster and cheaper than it in terms of transactions. These include:
- Solana,
- Avalanche,
- Arbitrum,
- Polygon,
- Optimism,
- Cosmos and others.
The only thing that makes the BNB Smart Chain ecosystem stand out is the number of decentralized applications (DApps), by which it ranks second in DeFi after Ethereum. The opBNB solution, on the other hand, is only gaining momentum, and its TVL has more than doubled since its launch in August 2023.
