Binance coin was created with the intent of operating a native crypto asset, called BNB, meant to offer an alternative way to pay for fees charged to traders using the exchange.

BNB can be used to pay Binance’s 0.1% per trade fee in addition to its withdrawal fee, which is charged when users move their cryptocurrencies from the exchange to a private wallet. BNB can also be traded for other cryptocurrencies.

How does Binance Coin work?


Binance coin is an ethereum-based (ERC-20) token that can be used to trade cryptocurrencies and pay for fees on the Binance exchange. BNB tokens can be used to pay fees on the exchange, with the incentive being that Binance offers a rebate as an incentive for up to five years of membership.

Binance is distinct from other crypto exchanges in that it transacts purely in cryptocurrencies as opposed to exchanges that deal in fiat currencies. Founder Changpeng Zhao’s vision for Binance coin was to compete with the other exchanges by offering solutions to the numerous problems he saw with the cryptocurrency trading infrastructure.

Launch & issuance

Binance completed its initial coin offering (ICO) of 100 million BNB on July 21, 2017.

All BNB tokens were created prior to the ICO, and were sold within 20 days, raising approximately $15 million.

The funds raised were used in three different ways: 35% of the funds were used to build the Binance platform and perform system upgrades; 50% were used for Binance branding and marketing; and 15% were reserved as emergency funds.

Network design & security model

BNB started as an Ethereum-based (ERC-20) token that eventually moved to its own custom blockchain called Binance Chain. Unlike Ethereum, however, Binance Chain does not support smart contracts.

Binance Chain utilizes the Tendermint byzantine-fault-tolerant (BFT) consensus mechanism. The system involves several different types of nodes: Validator nodes, select community members who vote to validate transactions; witness nodes, which witness the consensus process and broadcast transactions to other nodes; and accelerator nodes, which are owned by organizations and speed up the transaction validation process.

Once blocks are produced, the fees collected are distributed among all validators.

Monetary policy/ token policy

Binance has capped the BNB supply at 200 million tokens. 100 million tokens were released to the public during the ICO, while 80 million were allocated to the founding team and 20 million to angel investors.

In order to combat the depreciation of value that will happen with the yearly decreasing discount, Binance plans to burn half of its total supply, 100 million tokens, over time. The final goal of “The Burn” is to stabilize the price of BNB over time.

Transaction processing

Validator nodes vote to process transactions in the network as part of Binance Chain’s Tendermint byzantine-fault-tolerant (BFT) consensus mechanism.

Users can speed up transaction processing by choosing an accelerator node, which works in tandem with validator nodes.