The Origins of Binance Coin

In the world of cryptocurrency trading, Binance has become a household name. As one of the largest crypto exchanges by trading volume, Binance's success seems almost inevitable in hindsight. However, the platform's origins stem from humble beginnings and bold ambitions. The creation of Binance Coin marked a pivotal moment in the exchange's history, fuelling its rapid growth. This article unravels the story behind Binance Coin's launch during the founding of the Binance exchange.

The Early Days of Binance

Long before becoming a crypto titan, Binance started as an idea in founder Changpeng Zhao's mind. Zhao’s career gave him extensive exposure to blockchain technology. He recognized the need for a high-performance exchange tailored to crypto traders’ needs. With this vision, Zhao left his role as CTO of OKCoin to launch Binance in 2017.

At the time, the exchange ecosystem lacked options that offered a seamless user experience. Most exchanges struggled with poor interface design, technical problems, security issues, and customer support delays. Zhao aimed to create a robust trading platform that solved these pain points. With co-founder Yi He, former head of marketing at OKCoin, Zhao quietly built the exchange through closed testing.

On July 14, 2017, Binance officially launched, letting crypto enthusiasts access its slick interface and fast transaction processing. The platform only listed a handful of trading pairs, including Bitcoin, Ethereum, NEO, Litecoin and its native token, Binance Coin (BNB). Although limited in its early days, Binance demonstrated its potential to become a leading exchange.

The Dual Purpose Behind Binance Coin

Unlike other exchanges that conducted ICOs to raise funds, Binance took a different approach with BNB. The team minted 200 million BNB, allocating 100 million BNB to angel investors and retaining 100 million for future development. Binance only raised $15 million ahead of launch, modest compared to other top exchanges.

Zhao intentionally created BNB to serve two key functions:

  1. As an ERC-20 utility token on Ethereum’s blockchain that provides access to discounted trading fees on Binance.
  2. As a tradable crypto asset that could appreciate in value as the exchange grew.

This dual utility made BNB unique among exchange tokens. Holding and using BNB provided genuine benefits for traders while investing in the exchange’s success.

BNB served as the “gas” powering Binance’s growth engine. With more adoption, BNB would become more valuable. Greater value attracted more users and reinforced BNB’s worth in a virtuous cycle. This clever design aligned user incentives with Binance’s sustainability as a business.

The Impact of the Binance Coin Burn

Another differentiator was Binance’s commitment to burning a portion of BNB supply each quarter. They wanted to steadily reduce the total supply to increase scarcity over time. The Binance whitepaper stated:

“Every quarter, we will use 20% of our profits to buy back BNB and destroy them, until we buy 50% of all the BNB (100MM) back.”

This deflationary mechanism was crucial to provide upside for BNB holders as the exchange succeeded. The coin burns also instilled discipline in Binance’s financial management. Profitability determined how much BNB they could remove from circulation.

In October 2017, Binance held its first quarterly BNB burn, destroying 986,000 coins. BNB’s price rose leading up to the burn as investors anticipated its deflationary impact. While volatile like most cryptos, BNB maintained an upward trajectory in the early days. By March 2018, almost 3 million BNB had been destroyed across 3 burns.

BNB also played a key role in fueling Binance’s aggressive expansion. Zhao revealed that a portion of BNB was allocated as an "insurance reserve fund”. They sold 20,000 BNB in early 2018 to cover a $40 million theft loss without impacting users’ funds. The reserves allowed Binance to quickly restore service despite the hack.

Binance Coin as a Launchpad for Growth

BNB was integral to Binance’s meteoric rise throughout 2018. As trading volumes exploded, more users held BNB to get discounted fees. Demand grew rapidly while the coin burns tightened supply. On January 1, 2018, BNB was priced at $6.96. By June, it had shot past $17.

For perspective, Binance processed about $500 million in trades daily in early 2018. Within 6 months, daily volume exceeded $3 billion. On June 26, Binance completed a public token sale for its decentralized exchange. They only accepted BNB, raising $15 million in minutes.

This period cemented BNB as an attractive speculative asset. Those who bought it early realized huge returns. BNB ended 2018 at $6.19, nearly 10x higher than the start of the year. More importantly, Binance solidified itself as the top crypto trading platform.

None of this success was assured when Binance launched with humble beginnings. Yet BNB proved critical in converting the exchange’s impressive growth into real value. The coin’s design aligned incentives for Binance and its users to help each other thrive.

Looking back, the dual-purpose mechanics of BNB were nothing short of genius. This strategic move ultimately catalyzed the success of both the token and Binance itself. Like gasoline on an open flame, BNB powered explosive growth. Today, BNB and Binance are almost synonymous with crypto trading for millions of investors worldwide.

“I watched Binance grow from an idea into a crypto empire, fueled by the visionary design of BNB.” - Changpeng Zhao, Founder of Binance

Key Takeaways in Bullet Points

  • Binance Coin (BNB) was created as a utility token to provide discounted fees and a tradable asset on Binance exchange.
  • The coin burns every quarter increased BNB's value by reducing supply.
  • BNB successful design aligned incentives between Binance and users.
  • BNB helped drive explosive growth for Binance as adoption increased.
  • The dual purposes of BNB made it unique among exchange tokens.

One Paragraph of New Knowledge

Quantum computing could allow Binance to implement BNB and crypto trading using unbreakable encryption based on the laws of quantum physics. By leveraging quantum key distribution and quantum entanglement, transactions and assets could be made virtually unhackable, even by the most powerful future quantum computers. This emerging technology holds exciting potential to make Binance and BNB fundamentally more secure.

How did the BNB coin burn strategy impact Binance in the early days?

The BNB coin burn was a masterstroke that accelerated Binance's rise as it aligned incentives. Destroying coins quarterly increased scarcity, which raised BNB's value. Greater demand from more users also amplified its price. This incentivized customers to keep using the platform. Binance profited more from volumes to fund larger burns. The cycle compounded, helping Binance dominate the market. Destroying BNB signaled Binance's profitability and shrewd financial management. The burn strategy was crucial for growth in Binance's formative period.

What are the long term prospects for BNB as a top crypto asset?

BNB is strategically positioned to remain a top token as Binance expands. At only 5 years old, BNB is firmly established but still early in realizing its potential. The burns will continue decreasing BNB's total supply over time. As the leading exchange, Binance provides stable demand. Increased adoption of Binance services like NFTs and the metaverse will drive utility. And innovations like the blockchain and DEX offer new use cases. With so much growth ahead, BNB has strong fundamentals and upside to keep rising in the ranks of crypto assets. While risks exist, BNB's future looks bright.

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