Per Binance website: "Binance Coin (BNB) powers the Binance Ecosystem. As the native coin of Binance Chain, BNB has multiple use cases: fueling transactions on the Chain, paying for transaction fees on Binance Exchange, making in-store payments, and many more."
Per page 9 of the Binance whitepaper, Binance holders receive discounts on all exchange related fees, in the amounts of:
A 50% discount rate within the first year of ICO (July 2017)
A 25% discount rate within the second year of ICO
A 12.5% discount rate within the third year of ICO
A 6.75% discount rate within the fourth year of ICO
No discount beginning in the fifth year after ICO
As of Q4, 2019, you can use Binance Coin to trade over 100 other cryptocurrencies on the Binance platform, or buy Binance Coin as more of a speculative investment on over 30 other exchanges. Binance Coin gives users an alternative medium of exchange currency to trade with on the Binance platform. Bincance exchange users can still choose to trade in other markets, namely- Bitcoin, Ethereum, and US Dollar Tether. Binance is considered the first exchange to perform an "IEO" (initial exchange offering), which is an ICO of an exchange-based token.
The Binance exchange facilitates staking and lending with a user's cryptocurrency deposits.
The Binance Chain (native blockchain) has a DEX (decentralized exchange) built on top of it, allowing peer-to-peer trading of cryptocurrencies; not as explicitly reliant on a central authority to facilitate the trades.
The Binance patform decided not to support use of smart contracts for sake of performance.
Binance was started by a Chinese businessman, named Changpeng Zhao, more commonly referred to as "CZ".
CZ was born in China and went to high school and college in Canada.
After of college, CZ helped develop trading systems for the Tokyo stock exchange.
CZ then went on to manage the futures trading platform at Bloomberg.
2005- CZ co-founded Fusion Systems Ltd., which makes low-latency trading systems for brokers.
2013- CZ left Fusion Systems to work full time on blockchain. He was the third person to join blockchain.info
CZ then became the CTO and co-founder of a trading platform called OkCoin.
September, 2015- CZ became the founder and CEO of Bijie Tech. which provides cloud-based systems to exchange operators. BijieTech is cited for having never accepted any outside investments, being cash flow positive from day one.
July, 2017- CZ lead the launch of Binance Coin, with $15M in funding raised at ICO. As of ICO, CZ and other members of Bijie Tech. transitioned to focusing exclusively on Binance. See page 11 of whitepaper for backstories of other founding members.
2018- Link to Binance blog post on top stats and timeline for Binance, in 2018.
April, 2019- Binance launched its own custom blockchain, Binance Chain, and began the migration of the ERC20-based BNBs over to the new chain. Binance Chain also has "DEX", their decentralized exchange, built on top of it.
SUPPLY & INFLATIONARY CONTROLS
According to the Binance whitepaper: "A strict limit of 200MM BNB will be created, never to be increased."
Mint: Unlike the Bitcoin network, new BNB coins are not mined into circulation. All BNB coins were issued at ICO to raise capital for Binance. Supply and inflation of BNB are primarily controlled by discounted exchange fee incentives, and a quarterly coin burn until only half of the original 200M BNB remain.
No more than 200M BNB will ever enter circulation:
80M (40%) were issued to the founding team. The vesting schedule for the founding team is 20% of their BNB every year, over the course of 5 years.
20M (10%) were issued to investors
100M (50%) were released as an ICO. Initial ICO purchases were done in BTC and ETH, on trading platforms around the world.
Burn: Every quarter, a certain percentage of BNB is "burned" (permanently removed from supply). The burn amount is influenced by trading volume in the previous quarter. This supply removal will happen until 50% of the initial BNB supply has been destroyed; and only 100M BNB remain. Here are data and insights from previous BNB burns.
When total supply of an asset (in this case BNB) decreases, while demand remains the same, price will increase. Thus, an additional incentive to holding BNB is that, holding all other factors constant, the value of a user's BNB will increase, after each quarterly burn.
According to the 9th burn blog post, most of the supply burned comes for the founding team members, as well as other addresses held by Binance; they do not perform a buy-back of BNB from users in order to remove BNB from circulating supply. This practice is a sign of fidelity as well as insurance for Binance (and it's team members) to hold enough of the BNB supply to conduct each burn without a buy-back. However, over time, if the team members and company do not hold as much BNB, then they have less financial incentive to maintain a successful company.
The above scenario is likely better than an alternative buy-back approach. Theoretically, if the founding team and lead investors who are responsible for 50% of all BNB holdings never sold their BNB, then all BNB would be removed from the circulating supply once all coin burns were complete. If this happened (or was close to it), then that would give a huge amount of price control to few founders and investors that hold the remaining 100M BNB.
As of Q4, 2019- there are 187.5M total BNB in supply, with 155.5M in circulation
Validator nodes are similar to miners in the Bitcoin network. Validator nodes maintain the Binance Chain and DEX ledger data. They represent select community members who vote to validate all transactions on the network. Transaction fees are collected and distributed among all Validators. Validators are selected from trusted members of the Binance community, and will eventually expand to more members as the ecosystem matures. The decentralized governance procedure will be used to elect delegates.
Anyone with proper hardware can run a full witness node on the Binance Chain, containing all the information and application logic of the blockchain. Witness nodes represent the majority of nodes in the Binance Chain and are responsible for witnessing the consensus process and serving as replicas of data to help propagate chain state around the network. They receive and broadcast transactions to all other nodes, including Validator nodes. Although these full nodes can receive and broadcast blocks and transactions with other full nodes and Validators, they are not able to participate in consensus unless they are a Validator node.
The Binance network encourages routing transactions through Accelerated Nodes. Accelerated Nodes are designed to speed up the transaction validation process and are promoted as being more secure ways to route transactions and connect to the network, with better user interfaces. Accelerated Nodes are part of Binance's validator network and are run by different organizations.
"The process for setting up Validators among different entities on Binance Chain is currently being defined. More details will be shared at a later date."
As of June 5, 2019, the Binance Chain network only features 11 Validator nodes, all of which have been pre-selected by Binance.
As of the latest data I can find, there are only 11 nodes on the Binance Chain responsible for validating transactions and participating in consensus. This indicates that even the ledger maintenance of their “Decentralized Exchange (DEX)” is centralized around 11 participants, selected by 1 company (Binance). This gives all the control, thus opportunity for corruption, to one/few participants.
According to page 17 of the Binance whitepaper "Security is Paramount". They "strive to ensure that we have followed all the industry best practices when it comes to securing infrastructure and data including ISO/IEC 27001:2013 and the CryptoCurrency Security Standard (CCSS)."
The main focuses for the design of Binance Chain are:
No custody of funds: traders maintain control of their private keys and funds. Thus if a user looses their private keys, there is no recovery method provided by Binance.
High performance: low latency, high throughput for a large user base, and high liquidity trading. We target to achieve 1 second block times, with 1 confirmation finality. (PLEASE NOTE: This speed is achievable due to the fact that there are only a few, thus centralized, nodes responsible for validating transactions on the Binance Chain.)
Low cost: in both fees and liquidity cost.
Easy user experience: as friendly as Binance.com.
Fair trading: minimize front-running, to the extent possible.
Evolvable: able to develop with forever-improving technology stack, architecture, and ideas.
Send and receive BNB
Issue new tokens. Users must designate a name, symbol, total supply amount, and if new tokens can be later minted.
Send, receive, burn/mint and freeze/unfreeze tokens
Propose to create trading pairs between two different tokens
Send orders to buy or sell assets through trading pairs created on the chain
All nodes perform the P2P matches of transactions on the DEX, and expect the same result. Open orders are only allowed to sit on the books for 72 hours before they expire, to where a small network usage fee is still charged.
If users connect to an Accelerated Node, then orders should get accepted and booked into a block within 1-3 seconds. If the order price is marketable, the order will be filled and trades will come back in about similar time. If users send the order from further away (self-setup full node), or there is heavy network traffic, the order may take longer to reach a Validator (block producer).
Fees are charged and shared among the block producers (i.e. Validators) to run the network, in order to pay for the network usage and prevent abuse and attack. Since all user transactions, include transfer, new order, cancel etc, they are all recorded in blocks and chain state, the fee will be shared among different transactions. New orders are exempt from fees to encourage usage and larger trades will be charged more for their benefits from the liquidity provided in the network. Order Expire and Cancel are also charged with a fee if they fail to provide any liquidity. Besides fees, no other gas is charged. Validating nodes periodically review and can vote to change how fees are administered.
In efforts towards transparency, any user can see another user's orders and balances if they know the corresponding addresses.
Binance DEX adheres to the idea that the most efficient and low cost way to perform trading and price discovery is to use a single order book. This single order book is managed and replicated across all full nodes with the same, deterministic matching logic. Simply allowing trading between two assets is expensive for not only the network but also its users in long term (and liquidity costs can be much larger). In order to efficiently use the network, Binance Chain only list assets against BNB and other widely accepted market assets.
After an asset is issued, which costs a small fee, anyone can "propose" to Validators to list it against particular quote assets. Validators then vote to accept the proposal. A deposit is taken to prevent network abuse. Once the proposal is accepted, the owner of the base asset can list the trading pair.
Binance was originally headquartered in China, then moved to Japan upon stricter cryptocurrency laws in China. In March 2018, Binance announced its intentions to open an office in Malta after stricter regulations in Japan and China. In April 2018, Binance signed a Memorandum of Understanding (MoU) with the Government of Bermuda. Months later, a similar memorandum was signed with the Malta Stock Exchange to develop a platform for trading security tokens.
As of Q4, 2019- Binance is used by over 30 other companies to provide goods and services.
BA in Economics. BS in Finance. Hostess of the Crypt Keepers’ Club. Passionate about research and data. I don’t fold sheets, I spread them.
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