In an unexpected turn of events, Binance Coin is making headlines… headlines which seem to imply that BNB could steal the throne from BTC. If you know anything about cryptocurrency, you’ll know that this is a bizarre idea based on a limited understanding of this industry, but since this Forbes BNB article ran, we’re going to cover this concept.
Let’s start out by covering just how different Bitcoin and Binance Coin are.
Bitcoin and Binance Coin Aren’t the Same Thing
First things first: Bitcoin is a payment network based on a blockchain and using a consensus mechanism called Proof of Work. In Proof of Work, miners (powerful blockchain-driving computers) verify Bitcoin transactions, introduce new BTC to the system, and keep the global network secure.
Binance Coin is also a cryptocurrency, but this is pretty much where the similarities end. Binance Coin doesn’t have miners. Instead, it’s run using a consensus mechanism called Delegated Byzantine Fault Tolerance. dBFT is complicated. Created by NEO’s Eric Zhang, it’s run by a limited number of global nodes and has not yet been road-tested as a way of running a truly global currency.
Now let’s talk about how Bitcoin and Binance Coin are used. Both are cryptocurrencies, which means they are used as money as an alternative to fiat currencies like US Dollars. But here, again, the similarities end. Bitcoin can be used to buy stuff just about anywhere, while Binance Coin is (primarily) used to buy things on just one website: the Binance Exchange.
Binance Coin can be used in place of Bitcoin, Ethereum, and Tether as a currency of exchange for all coins sold on Binance. Since it’s Binance’s own coin, users get 50% off trade fees when they use BNB instead of those other options. Outside of Binance’s website, however, there’s no real use case for Binance Coin except as an investment and trading token. Still, this hasn’t stopped BNB from gaining 300% in 2019, and being immune to the downward forces of the still-thawing Crypto Winter.
Why are BNB Prices Up 300% in 2019?
Why has BNB gained so much value in recent months, though? Simply because Binance is one of the most popular exchanges in the world. As crypto trading volume decreased overall, Binance managed to consolidate this action onto its site. Other crypto exchanges failed during this time, and Binance managed to increase its user base. So while trading has been down overall, Binance’s action is still white hot, which makes Binance Coin BNB a hot commodity in any climate.
We say all this to say that Binance Coin may continue to go up in value, possibly outpacing Bitcoin prices as it has been doing for months. However, Binance Coin is unlikely to replace Bitcoin as the premier global digital currency. BNB is not designed to do what Bitcoin does, and it doesn’t have nearly the digital infrastructure or adoption levels that Bitcoin does – nor is it as widely traded.
Binance Coin is likely to be one of the big winners in 2019, especially if the market recovers. Binance’s ambitions are enormous, and if the masses poured back into crypto, much of their trading would be done on Binance with BNB. However, let’s remember that Binance Coin and Bitcoin have two totally different use cases. They both have the potential to be great investments, but for totally different reasons, and neither will replace the other.
Featured image: Wit Olszewski/Shutterstock.com
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