Binance Coin (BNB) is a cryptocurrency created by the popular crypto exchange Binance. As the native token of the Binance ecosystem, BNB has become one of the largest cryptocurrencies in the world in terms of market capitalization. One aspect that is interesting to analyze for BNB is the concentration of the coin among top BNB holders and Binance accounts over time. Looking at this can provide insights into the distribution and centralization dynamics of BNB.
Distribution of BNB Among Top Holders
A cryptocurrency's distribution among top holders can give an indication of its centralization levels. For BNB, data shows that there is some concentration of the coin among high-tier holders, but not nearly to the same degree as Bitcoin.
As of September 2022, around 5% of the total BNB supply was held by the top 10 BNB addresses. The top 100 addresses held approximately 14% of the total supply. This indicates that BNB ownership is more distributed than coins like Bitcoin, where over 17% of the total supply is held by the top 10 largest BTC holders.
However, among the top BNB holders are addresses believed to be associated with Binance itself. This includes Binance's founder Changpeng Zhao as well as investment funds operated by Binance. The large holdings of BNB by entities tied to the Binance exchange is a centralizing force for the cryptocurrency.
Changes in BNB Holder Concentration Over Time
Looking at the data over time shows that the concentration of BNB among the top holders has decreased in recent years. In July 2019, the top 10 addresses held over 14% of BNB. The amount held by the top 100 was close to 30% of the total supply.
Fast forward to 2022, and the figures are 5% and 14% for the top 10 and top 100 holders respectively. This indicates that ownership of BNB has diversified quite significantly, even as the overall supply and market cap has grown over time.
There are a few likely reasons for the decreasing concentration:
- More exchanges listing BNB over time, distributing the coin across different holder bases
- Growth of DeFi protocols utilizing BNB, dispersing the coin supply to yield farmers
- Binance burning BNB tokens over time, reducing the proportional holdings of top addresses
While concentration has dropped, Binance-affiliated entities still represent a substantial portion of BNB held by the top tier addresses. But overall the data shows that BNB has diversified from its early days.
Binance Accounts Holding BNB
In addition to on-chain wallet addresses holding BNB, a significant amount of the coin also sits in user accounts on the Binance exchange itself.
Estimates put the amount of BNB held on Binance at around 15-30% of the total BNB supply. This BNB is distributed across millions of user accounts on the platform.
The number of Binance accounts holding BNB has grown substantially alongside the increase in the exchange's userbase. In July 2017, Binance had just over 200,000 registered users. As of 2022, Binance has surpassed 120 million registered users.
Not all of these users necessarily hold BNB. But Binance reports that around 40% of its user base holds at least some amounts of the token. This equates to tens of millions of Binance accounts holding a portion of the BNB supply at this point.
The massive growth in Binance users is likely a major driver of BNB gaining more distribution over time. As the exchange added millions of new users worldwide, BNB holdings became less concentrated among the top on-chain addresses.
The Tradeoffs Between Decentralization and Utility
While the decreasing concentration of BNB among top holders is a positive, there is still criticism about BNB exhibiting a degree of centralization:
"The extensive holdings of BNB by Binance itself and people close to the exchange should raise questions. Too much control by one entity could compromise the coin's intended utility and monetary properties down the line."
There is an argument that some centralization is necessary for BNB to properly serve its purpose. BNB powers various utility functions across the Binance ecosystem. For these features to operate smoothly requires alignment between the major Binance stakeholders and BNB holders.
Too much decentralization could potentially render BNB ineffective for its use cases. But too much centralization raises concerns about control and censorship. It's a challenging balancing act that Blockchains need to get right.
Overall, the data shows BNB has trended in a positive direction regarding decreasing top holder concentration. But its ties to Binance mean there are still centralization tradeoffs being made to maximize its utility. Striking the optimal balance is something that remains to be seen as the Binance ecosystem and BNB continue maturing over time.
Does the growth of DeFi pose a threat to the utility of BNB?
The massive rise of decentralized finance (DeFi) has unlocked a wealth of new use cases for cryptocurrencies. DeFi allows for decentralized trading, lending, borrowing, and more - all without centralized intermediaries. This growing landscape could be viewed as a potential threat to the utility of BNB long-term.
On the Binance Smart Chain, DeFi protocols have jumped in popularity. But most of these DeFi platforms still rely heavily on BNB for gas fees, payments, governance, and incentivization. So in many ways, DeFi brings more utility to BNB currently.
However, as DeFi expands, there is a chance that BNB gets used less if alternative blockchain platforms like Ethereum gain more DeFi dominance. Projects may opt to avoid the Binance Smart Chain entirely to have a more decentralized base layer.
But BNB has some advantages in terms of transaction costs and speed which will likely ensure it stays relevant for DeFi. And Binance will aim to continuously improve technology and provide incentives to retain its DeFi ecosystem.
So while DeFi may pose some decentralization challenges for BNB, it currently enhances utility and is unlikely to make BNB totally obsolete given its established advantages. But it does mean BNB needs to continue evolving to stay competitive as DeFi grows.
How might further adoption of NFTs impact BNB demand?
Non-fungible tokens (NFTs) have exploded in popularity recently. The rise of NFTs presents potential opportunities to increase utility and demand for cryptocurrencies like BNB.
Binance has added NFT marketplaces and features to its exchange to capitalize on this trend. BNB can be used to mint, buy, and sell NFTs on these platforms. The more activity that occurs, the more BNB is needed to facilitate transactions.
Furthermore, Binance launched an NFT-inspired metaverse platform called NFT Worlds. BNB holders can use the token to buy NFTs representing virtual land plots. Additional metaverse projects linked to BNB could arise as well.
More broadly, the growth of NFTs provides an added use case for cryptocurrency usage overall. Even NFTs issued on other chains like Ethereum can end up being traded across multiple exchanges that use BNB for fees, thus driving volume.
There may also be integration between DeFi and NFTs via NFT collateral loans, fractionalized NFTs, and other concepts that increase utility for cryptocurrencies.
Overall more NFT adoption should be a net positive for BNB by expanding its use cases. However, competitors are also launching NFT platforms, so Binance needs to continue iterating and attracting top creators to stay ahead. If so, NFTs do appear poised to potentially increase BNB demand.