Binance Coin (BNB) is the cryptocurrency created by Binance, the largest cryptocurrency exchange by trading volume. Launched in 2017, BNB started as a utility token on Ethereum but has grown significantly in value and now powers its own blockchain, the BNB Smart Chain (BSC).
Known for being fast and with cheap transactions, BSC has become a popular alternative to Ethereum, offering similar features like smart contracts and decentralized apps (dApps).
BNB was created in 2017 as a token on Ethereum, created to give discounts on trading fees at Binance, as well as bonuses for users using Binance’s referral program.
In 2019, BNB moved to Binance’s own blockchain, Binance Chain, and became its main token.
In 2020, Binance launched Binance Smart Chain (BSC), a faster and cheaper blockchain that supports smart contracts and apps. In 2022, the system was renamed BNB Smart Chain.
The BSC ecosystem includes several chains: BNB Smart Chain, BNB Beacon Chain, BNB Greenfield, and opBNB. Initially, the BNB Smart Chain and BNB Beacon Chain worked together in a dual-chain structure, with the Beacon Chain managing governance (done by validators and stakers, who vote on updates and rules).
In the future, the Beacon Chain will be deprecated. You can read more about the Beacon Chain’s deprecation here and here.
BNB Smart Chain uses a system called Proof of Staked Authority (PoSA) to keep the network secure and confirm transactions.
PoSA is a system used to secure a blockchain and validate transactions. The system combines elements of Proof of Stake (staking to qualify) and Proof of Authority (a limited number of trusted validators). Validators earn fees from transactions instead of new token rewards, helping keep costs low.
In PoSA, special participants called validators check and approve transactions, but they must first stake a certain amount of BNB to take part. Instead of creating new tokens as rewards, validators earn fees from the transactions they confirm. This helps keep transaction costs low since no extra BNB is added to the system.
BNB Smart Chain is secured by a group of 21 validators who are chosen every 24 hours by BNB stakers. Validators are responsible for approving transactions and maintaining the network. To become a validator, a candidate must stake at least 10,000 BNB. The selection process happens daily, so the set of validators can change based on how much BNB each candidate stakes. This system encourages community participation and rewards those who stake BNB.
Binance operates several of the top BNB validators, meaning BSC Smart Chain is considerably less decentralized than many other blockchains. The tradeoff here is that this increases transaction speed and reduces costs.
For more information about how this tradeoff works, please read our article called What is the blockchain trilemma?
BSC is designed for speed and affordability, with transactions confirmed in just 3 seconds thanks to its fixed gas fee structure.
As of early 2024, the average transaction fee on BSC is approximately $0.10, making it significantly cheaper than Ethereum while ensuring a smooth and fast user experience.
Binance regularly burns BNB tokens—removing them from circulation forever—through an auto-burn system and by burning part of the transaction fees paid in BNB. Over time, Binance plans to reduce the total supply from 200 million to 100 million BNB.
BSC is fully compatible with Ethereum’s EVM system, which means developers can easily move their apps and projects from Ethereum to BSC with very little change.
This allows users to use familiar tools like MetaMask and other apps designed for Ethereum on BSC, making it simple to switch and work between the two blockchains.
BNB is primarily used for paying transaction fees or joining decentralized finance (DeFi) activities like staking and yield farming.
Originally, BNB was an option to pay discounted trading fees on Binance’s exchange. Customers were also able to refer users to the platform and get a percentage of the trading fees paid to them in BNB. This is still possible when using Binance today.
BNB can be used on Binance’s decentralized exchange PancakeSwap (as well as several other decentralized exchanges) to trade tokens, create tokens and provide liquidity.
BNB is available on Binance and several other exchanges. It can be withdrawn to your Trezor wallet and managed in Trezor Suite, as well as some third party wallets like Metamask.
Inspired by Ethereum’s ERC-20 standard, BEP-20 tokens are tokens which exist on the BNB Smart Chain. Anyone can create BEP-20 tokens, and anyone can trade them.
If you use your Trezor device to manage your Binance Smart Chain account, your BSC address will function as your address for all your BEP-20 tokens, just like ERC-20 tokens on Ethereum.
For more information on using these BNB and BEP-20 tokens in Trezor Suite, please read our article here.