Cryptocurrency exchanges like Binance charge fees for trading on their platforms. These fees can add up, especially for active traders making many trades per day. One way to lower Binance trading fees is to pay them using Binance Coin (BNB), the native token of the Binance ecosystem. Paying fees with BNB provides a discount, making trading less expensive.
What is Binance Coin?
Binance Coin originated as an ERC-20 token on the Ethereum blockchain. It was launched by the Binance exchange in 2017 as a utility token for use on the platform. Binance Coin has since moved to its own blockchain, called Binance Chain.
Some key facts about BNB:
- It powers transactions on Binance Chain and Binance Smart Chain.
- It provides utility and value to the Binance ecosystem.
- BNB is used to pay trading fees, transaction fees, list new crypto assets, and more.
- There is a total supply of 200 million BNB.
How Binance Coin Lowers Fees
Paying Binance fees with BNB provides a significant discount. Users get a 25% discount if they have enough BNB in their account to cover the fee.
For example, the basic trading fee on Binance is 0.1%. If you use BNB to pay the fee, it drops to 0.075%. Over time, the discounts add up.
The main benefits of using BNB for fees:
- Lower trading costs - Pay less in fees on each trade
- Save money long-term - Discounts add up over many trades
- Easy to use - BNB held in account is automatically used for fees
- Limited supply - Increased demand for BNB may raise value
Paying fees in the native Binance Coin aligns the incentives between users and the exchange. Increased adoption benefits both parties.
How to Get Binance Coin
Here are some ways to acquire BNB for paying Binance fees:
- Purchase on Binance - Buy directly with Bitcoin or other cryptocurrencies
- Earn through Binance activities - Receive BNB as rewards and bonuses
- Trade on other exchanges - Deposit BNB from external accounts
- Peer-to-peer trading - Buy from or sell to other users 1-on-1
Once you have BNB, simply hold it in your Binance account wallet. It will automatically be used to cover fees at the discounted rate. Make sure to maintain a balance to continually benefit from lower fees.
The Impact of Burning Binance Coin
One unique aspect of BNB is that Binance periodically burns (destroys) a portion of the supply. This reduces the total amount in circulation.
- In the first burn in 2017, Binance destroyed 986,000 BNB, worth around $45 million at the time.
- Additional quarterly burns followed.
- In total, over 3.6 million BNB has been burned so far.
How does burning BNB impact users?
- Creates deflationary pressure - Reduces available supply
- Increases scarcity - Remaining coins become more valuable
- Rewards long-term holders - Burns financed by Binance profits
- Indicates strong ecosystem - Burning only done if profitable
The burning mechanic is crucial for Binance Coin's utility in lowering fees. It aligns incentives and encourages holding BNB long-term.
Considerations Before Using BNB for Fees
While Binance Coin has many benefits, there are also some drawbacks and risks to consider:
- Concentrated risk - Value depends heavily on Binance's success
- Volatility - Significant price fluctuations over time
- Alternative discounts - Other ways to lower fees, like referral codes
- Tax implications - Trading BNB may be a taxable event
The biggest concern is probably the concentrated exposure to Binance. If the company fails or the BNB project flounders, the token would likely lose significant value. However, Binance's continued growth and dominance suggest this outcome is unlikely.
For most traders, the trading fee discounts outweigh the risks. Just be aware of the potential downsides before converting all your crypto assets into BNB. Moderation and diversification are wise strategies.
"BNB has become an essential part of my trading"
As an active crypto trader, I was skeptical of Binance Coin at first. I generally avoid "exchange tokens" and the associated risks. However, the fee discounts were too significant to ignore. Now BNB makes up a major portion of my portfolio. It reduces my costs and passively grows in value from the burns. While I acknowledge the concentration risk, BNB has become an essential part of my trading.
Key Long-Term Factors for Binance Coin's Growth
Binance Coin has strong fundamentals and powerful growth drivers that suggest it will continue appreciating in value over the long run. Here are some of the key factors:
- Expanding Binance ecosystem - More products and services to utilize BNB
- Ongoing coin burns - Reduce supply and increase scarcity
- Dominance of Binance exchange - World's top trading platform
- Increased adoption - More users means more demand
- Development of DeFi and NFTs - New use cases beyond fees
- Global regulatory acceptance - More legitimacy over time
As long as Binance stays innovative and compliant, BNB's role is likely to expand. Paying discounted fees is just the beginning of the token's utility. Its incorporation into more aspects of Binance should enable sustainable growth for the foreseeable future.
Should You Convert Other Cryptos to BNB to Reduce Fees?
Yes, converting other cryptos specifically to lower Binance fees can make sense in many cases. Here are some tips:
- Stick to stable portion of portfolio - Don't overexpose yourself
- Do the math on discounts - Calculate potential savings
- Factor in tax implications - May increase obligations
- Consider trading activity level - Frequent traders benefit most
- Watch the BNB price - Look for dips to buy at lower points
Establish a fixed percentage of your crypto portfolio to allocate to BNB - 10-25% is reasonable depending on your risk tolerance. Convert when the price is favorable relative to Bitcoin or your local currency. The increased liquidity from active trading should offset the conversion costs.
In summary, Binance Coin offers crypto traders discounted fees and other benefits on Binance exchanges and services. The periodic coin burns create deflationary pressure that increases BNB's value over time. Despite some risks of overexposure, paying fees with BNB can significantly reduce costs for active traders. Following proper portfolio allocation practices, converting other cryptos to BNB can be an effective fee reduction strategy.