- Binance coin, which started in 2017, has become one of the most controversial cryptocurrencies.
- Binance is able to handle three times more transactions than etherium at half the cost.
- Despite investigations in it’s parent company, many believe the coin will continue to grow.
While binance coin may not be the largest cryptocurrency — it is perhaps the most controversial.
Headquartered in the Cayman Islands, the cryptocurrency has become a magnet for a list of allegations of tax evasion, money laundering, and even terrorism funding by authorities in the US, Japan, and the Netherlands.
Despite the controversies, interest in binance coin has skyrocketed. Its market capitalization is more than $55 billion, a 1,300% increase over the past year, and it has outperformed bitcoin and ether. And when the cryptocurrency market isn’t crashing, it’s either the third- or fourth-biggest cryptocurrency.
How binance coin started
Launched in 2017 by the former high-frequency-trading-software developer Changpeng Zhao, binance coin was originally a fork running on the ethereum blockchain before moving to a blockchain owned by Binance, the popular cryptocurrency-trading platform. The exchange said at the time it thought “significant improvements can be made in providing Binance users with a level of trading experience to which they are already accustomed.”
By doing so, Binance was able to raise funds and acquire users much more easily than releasing a coin on an independent platform.
“BNB coin was released as a way for Binance to effectively do growth hacking,” Patrick McCorry, a blockchain developer and former assistant professor at University College London, said.
The growth-hacking model was so successful that it started a trend among altcoins, with smaller coins like leo following suit.
In November, binance coin’s value peaked at $649.20 per coin, but the price has since dropped — though some crypto investors are bullish about the coin’s prospects for this year.
“This is a short-term correction, which is always needed to test support and build long-term strength,” Lisa N Edwards, a crypto trader, influencer, and advisor, said. “To the public, price movement declining is a bad thing. To a professional trader, this is where the money is made.”
The coin’s popularity is also inextricably linked to Binance’s cryptocurrency-trading platform. Traders receive up to a 25% discount on Binance’s trading platform when trading binance coin. Like ethereum, it is used to pay for fees on Binance’s blockchain, which can be used to create decentralized apps on the platform.
Its popularity also means the coin has come under scrutiny from regulators around the world.
Last year, US authorities began investigating whether Binance was involved in money laundering. In September, the Commodity Futures Trading Commission tacked on insider trading to the growing list of allegations against Binance’s exchange. Earlier in the year, Japanese regulators warned the company against operating an exchange in the country without a license.
In August, Dutch regulators said Binance was not in compliance with the country’s anti-terrorism and money-laundering laws. Two months later, the company was forced to freeze accounts associated with a man in Mumbai, India accused by the government of being a notorious drug kingpin.
How is binance coin different from ethereum?
Binance coin is similar to ethereum but can handle more than three times the latter’s number of transactions.
Ethereum’s main flaw is that it limits the total computation that can be performed at any one time to maintain decentralization. This limits ethereum to 30 million transactions every 14 seconds, with users racking up “gas” fees when trading on the platform. For traders, continually being stung with a charge every time they transact can add up. By sacrificing decentralization, Binance’s blockchain can handle as much as 80 million transactions every two seconds at a fraction of the cost.
“It’s a magnitude more,” McCorry said. “The downside is the loss of decentralization, as you need big, beefy computers to participate in and protect the network.” Others have accused the project of being run like that of a “stoned teenager,” arguing that the developers are haphazardly tweaking the blockchain’s parameters without much regard for the consequences.
At its peak in November, 16.2 million transactions took place in a day on the Binance Smart Chain. That’s now hovering between 6 million and 7 million a day, according to the analytics firm BscScan. But Binance’s Zhao has big plans for the Binance Smart Chain: In October, he launched a $1 billion accelerator fund designed to promote adoption of the Binance Smart Chain and binance coin.
Can binance coin shed its controversial image and become a leader in cryptocurrency?
Binance coin has to weather plenty of storms to continue its role as one of the leading cryptocurrencies. Aside from the current crash, in which the coin has dropped by 11%, the investigation into its parent company is ongoing. Any negative outcome could cause a price drop.
Yet many feel the coin is still growing.
“I currently believe binance coin is undervalued for its utility,” Edwards said. “If we compare it to ethereum, it basically does everything ETH does but with super low transaction costs and a strong development team that continues to develop and implement new game-changing technology, making it easier to use for the everyday person.”
Privacy remains an issue, especially since binance coin isn’t as decentralized as ethereum. But decentralization can be a complicated concept.
“You could argue it’s cheaper to use and it’s more affordable for a large population,” McCorry said. “And privacy is the same problem on all chains.”
Not everyone agrees.
“It’s not going to change the crypto world,” said Layah Heilpern, author of ‘Undressing Bitcoin’. “It’s another ethereum competitor because it’s faster and cheaper. But there are loads of competitors. The whole DeFi space is focused on improving ethereum.”
But Heilpern said binance coin would have a strong future.
“It’s not going anywhere because it’s Binance,” she said. “The chain will continue to grow, and more projects will migrate from ethereum to binance — hence the price will go up.”