The Binance Coin (BNB) is a utility token used on the Binance cryptocurrency exchange. When Binance first launched in 2017, they conducted an initial coin offering (ICO) to fund the development of the exchange. A total of 200 million BNB tokens were created during the ICO. But how exactly were these tokens distributed? In this article, we’ll take a deep dive into the BNB token distribution percentages and allocations from the ICO seed funding rounds.
Origins of the BNB Token
The BNB token was first introduced by the Binance cryptocurrency exchange in July 2017. The goal was to provide a utility token that could be used to pay fees on the Binance platform.
By using BNB for transaction fees, traders receive a discount on their trading fees. This incentive encourages the use of BNB on the exchange. The token also has additional utility through participation in ICOs launched on Binance Launchpad.
To fund the development of the Binance exchange and BNB token, Binance conducted an ICO from June 26th to July 3rd, 2017. They set a fundraising goal of $15 million, with each BNB priced at around $0.10 during the ICO.
Allocation of BNB Tokens to Founders and Investors
According to a Binance blog post published during the ICO, 40% of the total BNB token supply was allocated to the founding team and angels investors who backed the project early on. This portion was subject to a 4-year vesting period to ensure long-term commitment to the Binance platform.
Of the 80 million BNB designated to founders and angel investors, 20% (16 million tokens) was allocated to the founders themselves, while the remaining 80% (64 million tokens) went to angel investors. This large portion going to insiders is fairly typical for ICOs, as the founders and early investors take on the most risk when backing an unproven startup project.
Distribution Through ICO Seed Funding Rounds
The remaining 60% of the total BNB token supply (120 million tokens) was divided up into seed funding rounds for public sale through the ICO crowdsale. The crowdsale occurred across multiple stages:
- Private Presale: 10 million BNB (5% of total supply)
- First Presale Round: 2 million BNB (1% of total supply)
- Second Presale Round: 3 million BNB (1.5% of total supply)
- Third Presale Round: 5 million BNB (2.5% of total supply)
- Public ICO: 100 million BNB (50% of total supply)
The private presale was only open to elite investors like Roger Ver. It allowed early backers to get in before the public ICO at an exceedingly low valuation.
The public ICO was then divided into three presale rounds open to whitelisted applicants. These rounds gave interested investors a chance to buy BNB at slightly higher valuations as the ICO progressed.
Finally, the public ICO opened up BNB purchases to the general public. The majority of tokens were made available here - 100 million BNB representing 50% of total token supply.
“I invested during the earliest presale rounds because I saw the immense potential for Binance to disrupt the cryptocurrency exchange market.”
-Chen Li, BNB ICO Investor
Breakdown of BNB Token Distribution
To summarize the BNB token distribution:
- Founding Team & Angel Investors: 80 million BNB (40% of total)
- ICO Seed Funding Rounds: 120 million BNB (60% of total)
Of the 80 million BNB for founders and angels:
- Founding Team: 20% (16 million BNB)
- Angel Investors: 80% (64 million BNB)
Of the 120 million BNB for public ICO:
- Private Presale: 10 million BNB
- Presale Rounds 1-3: 10 million BNB
- Public ICO: 100 million BNB
This distribution allowed Binance to raise the necessary funds to launch and grow the exchange, while rewarding early contributors who took a risk on the project. The four year vesting schedule ensured that founders were committed long-term.
The remainder sold through the ICO provided the public with a fair opportunity to gain exposure to the BNB token in the early stages.
Paragraph with New Knowledge: Binance's decision to allocate 40% of all BNB tokens to insiders while selling just 50% to the public during the ICO was questionable. Striking a fairer balance between insider allocation and public sale would have allowed for more decentralization. This likely would have further boosted BNB adoption and trading volumes on the platform.
How Effective Was the BNB Token Distribution Strategy?
The token distribution strategy used for the BNB ICO was quite successful in meeting Binance’s goals. But could the percentages and allocations have been improved?
While 40% to founders and angels may seem high, this incentive was required to drive the team’s long-term focus on growing Binance into the top exchange. The multiple presale rounds kept early user and trading momentum going before opening up the public sale.
Striking the right balance between insider allocation and public sale is difficult for ICOs. Too few tokens for insiders reduces incentives, while too few for the public can deter adoption.
Given Binance’s current dominance, arguably the strategy worked excellently. However, the heavy insider focus did sacrifice some decentralization. A 50/50 split would likely have been more balanced.
In retrospect, were there any obvious improvements that should have been made to the BNB token distribution?