What is BNB token and BNB Smart Chain? Complete Guides 2024

BNB Smart Chain, formerly Binance Smart Chain, is an Ethereum Virtual Machine (EVM) compatible blockchain platform capable of general purpose smart contract execution. It is a base layer, or Layer 1 (L1), which is part of the BNB Chain ecosystem of blockchains that is developed with the support of cryptocurrency exchange Binance. It is known for its fast transaction time and low transaction cost.

BNB token is the fuel for BNB Smart Chain. Originally known as Binance Coin, BNB has been rebranded to “Build and Build.” In addition to serving as BNB Smart Chain’s “gas” token, BNB also provides holders with on-chain governance rights.

What is BNB token?

is the native token in the BNB Chain ecosystem, which includes Smart Chain (BSC) and BNB Beacon Chain. On BNB Smart Chain, is used to pay for transaction fees and to participate in the network’s consensus mechanism.

is also used as a utility token that allows users to receive discounts on transaction fees when trading on the Binance centralized cryptocurrency exchange. Over time, Binance has broadened the utility for BNB, integrating it into various aspects of the Binance ecosystem, such as their decentralized exchange (Binance DEX), token launch platform (Binance Launchpad), and more.

How does BNB Smart Chain work?

Smart Chain operates on a Proof of Staked Authority (PoSA) consensus mechanism that combines features from Delegated Proof of Stake (DPoS) and Proof of Authority (PoA). Validators are selected through staking-based governance, while “Candidates” serve as backups to maintain the functionality of the network when it is under stress. This hybrid approach ensures that blocks are produced by a limited set of validators, thus enhancing efficiency and decentralization. With a short block time of 3 seconds, transactions can be confirmed quickly, providing users with a smooth experience.

Smart Chain supports EVM-compatible smart contracts and protocols, facilitating cross-chain transfers and other communications. The native token, , is used for smart contract execution and staking. There is no inflation of the BNB token, which means that validators do not earn a block reward. Validators are instead compensated in with the transaction fees for executing smart contracts, although a portion of these transaction fees are claimed by the BNB Chain protocol.

Smart Chain (BSC) is a blockchain network designed for high performance and low fees. Here’s a breakdown of how it works:

Consensus Mechanism:

• BSC uses a Proof of Staked Authority (PoSA) system, which combines elements of Proof of Stake (PoS) and Proof of Authority (PoA).
• In PoSA, users stake tokens to become validators responsible for validating transactions and securing the network.
• Unlike traditional PoS, there are no block rewards. Instead, validators earn fees from the transactions they validate.

Transaction Speed:

• By having a limited set of validators, BSC achieves fast block times of around 3 seconds.
• This quick validation process allows for swift transaction confirmation.

Smart Contracts:

• BSC is EVM-compatible, meaning it can run smart contracts written for the Ethereum Virtual Machine (EVM).
• This compatibility attracts developers who can easily port their existing Ethereum projects to BSC.

BNB Token:

• is the native token of the BNB Chain ecosystem, which includes BSC.
• It serves multiple purposes:
  • Paying transaction fees on BSC
  • Participating in the network’s staking mechanism
  • Receiving discounts on trading fees on the Binance exchangepen_spark

History of BNB Smart Chain and BNB token

Binance cryptocurrency exchange and token were established in 2017. token was initially an ERC-20 token on the Ethereum blockchain. In 2019, it migrated to Binance Exchange’s propriety blockchain called Binance Chain, and eventually became the fuel for Binance Smart Chain (BSC), which launched in September 2020. Due to the network’s high transaction speed, low transaction cost, and EVM compatibility, BSC quickly gained traction as the DeFi movement took off and Ethereum suffered from chronic congestion and high fees.

In February 2022, Binance Smart Chain was rebranded as BNB Smart Chain. Smart Chain is itself part of the BNB Chain ecosystem of blockchains, which consists of BNB Beacon Chain (the staking and governance layer), BNB Smart Chain (the smart contract execution layer), (a zero-knowledge proof rollup for scaling), and BNB Greenfield (a decentralized data storage platform).

How can you use BNB and BNB Smart Chain?

Advanced users also have the option to directly interact with Decentralized Apps (dApps) on the Smart Chain network using the Bitcoin.com Wallet (via WalletConnect). dApps on Smart Chain enable DeFi use cases like trading, borrowing and lending, prediction markets, crypto derivatives, synthetic assets, NFTs, and more.

There are several ways you can use and Smart Chain, depending on your goals:

Holding and Trading BNB:

• Buy and Sell: You can buy and sell on cryptocurrency exchanges like Binance or through supported wallets.
• Trading Fees: Hold to get discounts on trading fees on the Binance exchange.
• Investment: BNB’s value can fluctuate, so some users hold it as a long-term investment (remember, this involves risk).

Using DeFi on BNB Smart Chain:

• Decentralized Applications (DApps): is used to pay transaction fees when interacting with DApps built on Smart Chain. These DApps offer a variety of DeFi (Decentralized Finance) services, including:
  • Swapping Tokens: Use DEXes (Decentralized Exchanges) like PancakeSwap to trade cryptocurrencies without a central authority.
  • Yield Farming: Earn rewards by lending or staking your crypto assets in DeFi protocols.
  • Providing Liquidity: Lock up your crypto in liquidity pools to facilitate trading on DEXes and earn fees.
• NFT Marketplaces: Use to buy and sell NFTs (Non-Fungible Tokens) on marketplaces built on Smart Chain.

Staking BNB:

• Earn Passive Income: Stake your to support validators on the network and earn rewards in return. You can stake directly on Binance or through DeFi platforms.

Other Uses:

• Paying for Goods and Services: Some merchants may accept BNB as a payment method.
• Travel and Booking Services: Platforms like TravelbyBit accept BNB for booking travel and accommodation.

Binance Exchange

Binance is a major player in the world of cryptocurrency, known for being the world’s largest cryptocurrency exchange by daily trading volume. Here’s a quick rundown:

• Exchange Platform: Binance is a platform where users can buy, sell, and trade cryptocurrencies. It supports a vast array, over 350 different cryptocurrencies
• Crypto Wallet: Binance also provides a built-in crypto wallet for users to store their digital assets.
• Additional Services: Beyond trading, Binance offers other cryptocurrency-related services such as interest earning programs, tools for miners, and resources for traders. They even have their own blockchain and a native token, .
• Global Presence: While Binance has a global reach, it’s important to note that regulations can limit its services in certain countries, like the US (which has a separate Binance.US platform).

Overall, Binance is a comprehensive cryptocurrency exchange platform offering a variety of services for those interested in buying, selling, trading, and learning more about cryptocurrencies.

BNB Burn

The exact start date for Burn isn’t publicly available. However, we know it began in 2017, the same year was launched. BNB Burn refers to the process of permanently removing tokens from circulation, effectively reducing the total supply. This is done by Binance to increase the value of BNB for holders.

Here’s a breakdown of how it works:

• Auto-Burn System: utilizes an auto-burn system designed to reduce the total supply to 100 million . The amount burned each quarter is determined by a formula that considers the price of and the number of blocks generated on the Smart Chain (BSC). This makes the burn process more transparent and predictable.
• Real-Time Burn: In addition to the quarterly auto-burn, also has a real-time burning mechanism implemented through BEP95. A small portion of the gas fees collected for each block on the BSC is automatically burned.
• Pioneer Burn Program: This program reimburses users for lost BNB in eligible cases (like accidentally sending to the wrong address) and then burns that amount of . This helps to offset lost coins while still reducing the overall supply.

CEO OF BINANCE

Binance’s current CEO is Richard Teng. He took over the position in November 2023 after the previous CEO, Changpeng Zhao (CZ), stepped down.

Here’s a quick background on both:

• Changpeng Zhao (CZ):
  • Co-founded Binance and served as CEO until November 2023.
  • Resigned amid regulatory pressure from the US related to money laundering.
  • Pleaded guilty to related charges and was sentenced to four months in prison in April 2024.
• Richard Teng:
  • Extensive experience in finance and regulation.
  • Previously held roles at the Monetary Authority of Singapore and the Singapore Exchange.
  • Seen as a strategic fit for navigating Binance through ongoing regulatory challenges.

Is Binance Safe?

Binance is considered one of the safer cryptocurrency exchanges, but there are still some risks to be aware of:

Security features:

• Binance employs a variety of security measures to protect user assets, including cold storage, two-factor authentication, and address whitelisting.
• They also have a $1 billion Secure Asset Fund for Users (SAFU) to reimburse users in case of security breaches.

Things to consider:

• No exchange is completely secure. There have been hacks of major exchanges in the past.
• Keeping large amounts of cryptocurrency on any exchange for a long time is generally not recommended. A hardware wallet is considered a more secure option for long-term storage.
• Binance has faced regulatory issues in some countries.

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