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Summary of the thesis
Binance Coin (BNB-USD) is the native coin of the Binance exchange. In a controversial move, Binance has now made a controversial move by converting numerous stablecoins on its platform to its own own stablecoin BUSD (BUSD USD).
Binance is much more than an exchange and it is emerging as a very dominant player in the crypto space while at the same time being a very centralized entity and we cannot take that lightly.
BNB: More than a cryptocurrency
Binance Coin operates one of the most popular cryptocurrency exchanges and its entire ecosystem. BNB was originally issued as an ERC20 token on the Ethereum blockchain when it was first launched in its 2017 ICO. Binance’s technology reaches all layers of the cryptosphere, making Binance a household name.
But Binance is much more than an exchange, it is a thriving ecosystem. There is a centralized and decentralized cryptocurrency exchange, an NFT platform (Binance NFT), a cryptocurrency wallet (Trust Wallet), a token launch platform, a blockchain/crypto education platform (Binance Academy), a charity (Binance Charity ), and many blockchain projects running on the Binance Smart Chain.
Binance introduced the BNB chain in 2019 when Binance switched from a token on the Ethereum network to its mainnet. The main focus of the BNB chain is to facilitate fast, reliable and decentralized trading.
To integrate smart contracts and make the Binance network scalable, Binance launched a new blockchain network called Binance Smart Chain (“BSC”). BSC runs parallel to the older BNB network, supports smart contracts and is compatible with the Ethereum Virtual Machine. BSC is not a Layer 2 scalability solution built on top of Binance Chain; it is an independent blockchain. Binance Chain has been renamed Binance Beacon Chain.
BSC has become one of the most popular Layer 1 blockchains of choice for new blockchain projects; Just like the Ethereum blockchain, BSC focuses on the programmability of smart contracts. Some of the most popular dApps run on BSC.
A bold step
Binance recently announced that it would be removing the USCoin USD (USDC-USD), Pax Dollar (USDP-USD), and True USD (TUSD-USD) stablecoin trading pairs from its exchange. Users’ holdings of these stablecoins are automatically converted to BUSD at a 1:1 ratio; However, users can still send and receive these stablecoins on Binance, but they will not be tradable assets on the exchange. With this move, the volume of the other stablecoins will most likely move in BUSD.
Stablecoins are among the cryptocurrencies with the highest trading volumes and market capitalizations. Binance launched its stablecoin BUSD in September 2019. BUSD is pegged to one dollar on a one-to-one basis – one US dollar or equivalent is held in reserve for every BUSD.
In recent months, there have been incidents of stablecoins losing their USD peg value, leading to mass panic and loss of investor funds. The fall of Terra Luna (LUNA-USD) and its stablecoin Tether USD (USDT-USD) is fresh in the minds of the crypto community. As for Acala, a DeFi platform on Polkadot (DOT-USD), its stablecoin aUSD also lost its peg after an exploit on one of its liquidity pools that resulted in 3 billion aUSD tokens being incorrectly minted.
On the one hand, the exchange’s fans have praised this move as they have faith in the Binance ecosystem and its stablecoin; Critics, on the other hand, have expressed displeasure with Binance’s move, accusing the cryptocurrency giant of abusing its monopoly position.
This move clearly goes against many of the crypto principles, but BNB is well within its rights and so far it doesn’t seem to have hurt its popularity.
Is Binance too big?
Binance is the largest crypto exchange in the world, has the 5th and 6th largest cryptocurrencies (BNB-USD and BUSD-USD) and has numerous other interests in the crypto space.
For example, Binance acquired Trust Wallet in 2018. Trust Wallet has grown into one of the most widely used mobile cryptocurrency wallets today. Some of Binance’s notable acquisitions over the years include CoinMarketCap, the most popular cryptocurrency price tracking website; Swipe, a cryptocurrency debit card provider, and WazirX, India’s leading cryptocurrency exchange.
The Binance Smart Chain remains one of the most active blockchains in the cryptocurrency industry. It is highly secure and scalable. BNB as Binance’s main coin and its ecosystem has many benefits – paying fees and participating in IEOs, among others.
That being said, Binance is a centralized organization, as is their blockchain. Favoring your own stablecoin could be just the beginning of a very slippery slope, and investors should be aware of that.
Bring away
In a short space of time, Binance has come a long way in terms of products, acquisitions, partnerships, and utility in the crypto space. Binance and BNB continue to grow even as other exchanges and platforms fail. I’m still optimistic about BNB and Binance, but am concerned about the implications of having a centralized entity have so much control over the crypto space.
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