Bitcoin, Ethereum, Cardano... Binance: it seems that, every time you turn around, there's another cryptocurrency entering the market. That would happen even if you quit turning around.

Witness El Salvador announcing that bitcoin is now considered legal tender and Twitter CEO Jack Dorsey wistfully stating he would willingly walk away from the systems he co-founded to invest all of his time, energy and, presumably, his considerable fortune in cryptocurrency.

Cryptocurrency is a relatively new phenomenon on the financial horizon. The first block in the bitcoin blockchain was mined in 2009; thus the financial technology (fintech) world's first blockchain was created.

It's not a stable world just yet. It's still quite revolutionary and the products can be quite volatile. Still, it's an exciting development; fintech promises a host of consumer-oriented benefits such as eliminating third parties from transactions and more control and security over their financial choices.

Considering these advantages, it's no wonder everyone is keen to jump on the cryptocurrency chain. But which chain will you choose?

Superprof explored the top five investment-worthy cryptocurrencies; these are our findings on Binance coins.

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Binance: Historical Background

Rather remarkably, aspects of Binance predate even Bitcoin and blockchain. The whole concept is the brainchild of Zhao Changpeng, the Chinese-Canadian business executive who founded Fusion Systems in 2005. Their flagship product was high-speed trading systems designed for use by stockbrokers.

It's clear that, from the beginning, Mr Zhao's interest lay in finance.

Making trades faster was Mr Zhao's focus
Mr Zhao has long been focused on finance. Photo credit: kenteegardin on VisualHunt.com

In 2013, once the distributed ledger known as Bitcoin was well-entrenched, he joined the Blockchain.com innovation team. This platform provided services related to cryptocurrency in the form of wallets and exchanges. They also monitor(ed) cryptocurrency data.

For a while, he worked on OKCoin, a different digital asset exchange platform, too.

He had been based in Shanghai but, as the Chinese regulations tightened around cryptocurrency - ultimately leading to bans on cryptocurrency trading in that country, he moved his business first to Japan, then to Taiwan and ultimately to the Cayman Islands, where the company's headquarters are today.

In 2017, Binance launched the binance coin or BNB via ICO (Initial Coin Offering). Its meteoric rise has propelled BNBs to third place in market share capitalisation.

Join the discussion: how does BNB compare with Tether's worth?

How Does Binance Work?

With BNB commanding such a large market share, naturally, speculation abounds. Not just in its performance but in its possibilities. What can you do with it? How can you buy it? Why buy Binance when other cryptocurrencies may have greater real-world usage?

First, understand that there is a difference between Binance - the cryptocurrency exchange, and the binance coin, referred to as BNB.

Let's also overlook the confusion over the many meanings that BNB may have, from Bed and Breakfast to Airbnb.

BNB is an Ethereum network token; specifically an ERC-20 token. ERC stands for Ethereum Request Comment and 20 has no special meaning; it's just an arbitrarily assigned number.

Overall, 200 million BNBs were created, half of which were reserved for ICO participants - in other words, those who got in on the ground floor of the investment. Only 10% of the coins were generally available with the remaining 80 million coins going to people who worked on the project.

Now, at the risk of getting a bit technical, let's go over how Binance plans to control inflation and maintain its coin's value.

Every quarter, the company will spend one-fifth of its profits to buy back BNBs, until the stock of coins is exactly halved. Phase two of the plan involves building a decentralised cryptocurrency exchange, using BNB as a primary asset.

Is this vastly different from how bitcoin works?

In some respects, yes. But in one critical aspect, those systems operate under the same philosophy. Bitcoin limited their number of coins to 21 million, a strategy specifically designed to prevent inflation - the same principle that Binance seems to operate under.

One crucial difference between that more renowned cryptocurrency and BNB is that binance coins cannot be mined. More specifically, they've all already been created and offered up at the ICO event so, if you were planning on making your fortune in mining for BNB, you will probably need another plan.

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What Can Binance Coins Be Used For?

Contrary to other cryptocurrencies, BNBs are a function of the Binance system rather than a product of it. Thus, you're not likely to find any Binance ATMs or retail outlets that allow purchases to be paid in BNB. However, a few select merchants, notably in the travel and hospitality industries accept BNB as payment.

With that being said, there is substantial value in BNBs as an investment vehicle or if you wish to trade cryptocurrencies on the Binance exchange.

Remember that it is currently the third-highest rated cryptocurrency; that alone makes it worth holding on to any BNBs you might have in your digital wallet. And, if you trade on the Binance exchange, your transactions could be substantially cheaper than elsewhere. They'll be much faster, too.

One downside to the discount trading system that Binance set up in tandem with its ICO is its short run: the lower-fees bonus is scheduled to end this year. How that will impact trades and what new incentives the exchange might offer remains to be seen.

You can trade many cryptocurrencies on Binance
The Binance exchange allows you to trade in different currencies. Photo credit: Hektorej on Visualhunt.com

How to Buy Binance Coins

Now that we've outlined the system and its genesis, it's time to find out how we can get our virtual hands on some. The first step is to choose a wallet; the type of wallet you select depends on how you intend to use your coins.

You have two broad categories of wallets to choose from: hardware and software.

A hardware wallet stores your wallet's private access key on a physical device - maybe a USB. The obvious advantage of this type of wallet is that your coins are kept offline. With the device in your possession, nobody can key into your coins.

Nano S and Nano X are both ledger hardware wallets, with the X model being the newer one. That wallet affords you more flexibility as you can gain access from your smartphone as well as your PC.

Another optimum hardware wallet is the Trezor series; it too offers several iterations.

By contrast, software wallet choices are plentiful for all that they may be less secure. You might choose the economical Coinomi or the elegantly designed Exodus, which can accommodate more than a hundred different types of crypto assets. However, if you really wanted versatility, you should choose the Atomic Wallet.

Available for use on your PC or mobile, its interface can handle over 300 tokens and currencies so, if you have a cache of bitcoin, litecoin and XRP and you want to see everything at a glance, Atomic is for you.

As BNB is essentially Ethereum; it will work with many wallets, including:

  • CoolWallet S
  • Metal Vault
  • WinQ
  • Request Wallet
  • Enjin Wallet

and others not mentioned here. If you have a fav wallet that supports BNB, won't you let us know?

A final note on wallets: you will have the option of leaving your BNB on the Binance exchange but it's not a good idea to do so because you will be relinquishing control of your coins. However, if you only intend to use them for trades, then leaving them on the exchange may work well for you.

Now that you have your wallet, you need to find your BNB address. It will be a fairly long string of random letters and numbers, preceded by Ox - the indicator that these coins trade on Ethereum.

Now, depending on what you plan to do with your BNB - invest or trade, you need to find a suitable exchange.

If trade is where your aspirations lie, Binance is the logical choice. There, you may trade many different cryptocurrencies at lightning speed, and at a discount.

By contrast, eToro, which also supports BNB, is best used if you intend your coin purchase as an investment only. You can use standard payment methods such as debit and credit cards to buy your BNB; the cost for doing so is relatively low. However, cashing in on your investment is rather complicated.

You can help other UK crypto investors by sharing how to buy ethereum...

USBs qualify as a hardware wallet
Hardware wallets are not actual wallets; they are more of the USB variety. Photo credit: zcopley on Visualhunt

How to Withdraw BNB

As you ponder all of this information, keep in mind that BNB's value lies in the savings from discounted trading fees and the system's potential.

Should Binance forge ahead with its plan to build a decentralised network - thereby earning itself more renown, BNB will certainly appreciate in value. As an investment into a product with that kind of outlook, you could hardly go wrong. So, the recommendation is to buy BNB and store them in your hardware wallet.

Even if you bought BNB only to cover the exchange's fees as you trade, you should still withdraw the bulk of your cache into your wallet, leaving only a small percentage readily available on the platform itself.

That advice only concerns control; specifically, who has control over your coins. Safety is far less of a concern on Binance; they operate under multiple layers of protection to keep your coins safe.

If you want to cash out all or a part of your account, the platform makes it simple. You only need to log in to your account, click on the 'Withdraw' button, select to whom or where you will withdraw the funds to. Next, select the amount you will withdraw and... that's it!

Be sure to look over the transaction before you click that final 'withdraw' button. Should any of the information be incorrect - or if you chose the wrong network to disburse the funds over, they will simply disappear. There is no transaction dispute process nor any authority you might appeal to.

Thus, it pays to be very careful.

Your turn to chime in: what are your Cardano price predictions for this summer?

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Sophia

A vagabond traveler whose first love is the written word, I advocate for continuous learning, cycling, and the joy only a beloved pet can bring. There is plenty else I am passionate about, but those three should do it, for now.