What is BNB?
BNB is the native token on the BNB Chain. It can be used to pay for goods and services within and outside of the network. BNB is also used to pay gas fees on the BNB Smart Chain.
Outside of this, BNB has a range of useful functions on the BNB Chain. These include:
- Trading fee discounts when you pay in BNB on Binance’s exchange
- Access to exclusive token sales
- Access to the BNB Chain ecosystem of DeFi gaming, DApps, and more
BNB uses an auto-burn mechanism to continuously reduce its total supply to 100,000,000 BNB. This mechanism helps the network manage ongoing supply and demand pressures.
Recommended reading: 10 Most Popular Types of Crypto & Their Use Cases
Advantages & Disadvantages of BNB
Binance, as the world’s most well-known exchange, has helped BNB grow in popularity. But an exchange and a blockchain are two different things. Success in one of these areas doesn’t indicate perfection in the other. Let’s explore what advantages BNB Chain brings to potential investors, along with some disadvantages that it could improve upon.
Advantages
- Low Fees: Because of the unique PoSA consensus mechanism, the BNB Chain processes more transactions with less validator participation and computational energy. As a result, fees are quite low when compared to other smart contract blockchains like Ethereum.
- Great For Binance Users: If you already use the Binance exchange, having BNB on hand is comparable to having airline reward points. You can use BNB to reduce fees on every trade, for payment on various supported platforms, and to gain access to exclusive NFT drops.
- Unique Burning Mechanism: BNB’s auto-burn feature works to ensure that the coin can deal with the ongoing pressures of supply and demand. Auto-burning will continue until 100 million BNB remain in the market.
- Programmability: Although in its early stages, the use of smart contracts means that the BNB Smart Chain is highly programmable. Any app or protocol built on the network can interact with one another. If the network’s community continues to grow, we may see innovative use cases arise from this programmability.
- Tokenisation: Any item that can be registered in a digital format can be tokenised on the BNB Chain. While tokenisation is commonly used in the NFT space, it has real-world applications in real estate, art, and even gold. Think of it as a digital certificate of ownership for an asset.
Disadvantages
- New Project: Compared to Bitcoin and Ethereum, the BNB Chain is a relatively new project. While it has had much success and consistently ranks among the top crypto by market cap, the project will have to continue to innovate and find more utility and adoption in order to scale.
- Centralised: The BNB Chain is attached to a private company, Binance. It also uses the PoSA consensus model. In this model, transaction verification is concentrated in the hands of a small group of validators who can afford to participate in the process. These validators also need to give up information that could be used to identify them. When compared to other networks, the BNB Chain leans more towards centralisation, which flies in the face of some of the foundational ideas of crypto. This set-up also creates a very centralised point of failure since attackers only need to target a few key nodes to compromise the system.
- Target for Cyber Attacks: While the BNB Chain itself is safeguarded by cryptographic blockchain technology, Binance the exchange is frequently targeted by hackers seeking to penetrate hot wallets. This could be a concern for security-conscious investors.
