What Is BNB?
BNB is the native cryptocurrency of the Binance ecosystem, used for trading fee discounts, payments, and powering applications on Binance Chain and BNB Smart Chain. Originally launched as an ERC-20 token, BNB now underpins one of the largest crypto exchanges and blockchains, with real-world utility across trading, DeFi, and payments. Understanding BNB’s mechanics and tokenomics is essential for evaluating its role in the digital asset markets.
What You’ll Learn
- How BNB evolved from an ERC-20 token to a core asset on its own blockchain
- The real trading fee discounts and use cases for BNB on Binance
- How BNB’s quarterly burns affect its total supply and value proposition
- Ways BNB is used in DeFi, payments, and token launches
- Key risks and considerations for traders holding or using BNB
On This Page
What is BNB and how did it start?
BNB (originally Binance Coin) is the native token launched by Binance in July 2017 to power its exchange ecosystem and provide trading fee discounts. BNB began as an ERC-20 token on Ethereum, with a fixed supply of 200 million, and was distributed through an initial coin offering (ICO) that raised over $15 million. In April 2019, BNB migrated to its own blockchain, Binance Chain, and later expanded to support smart contracts with the launch of BNB Smart Chain (BSC) in September 2020.
BNB’s Early Purpose and ICO
At launch, BNB’s main use was to provide a 50% discount on trading fees on Binance during its first year. The ICO sold 100 million BNB (50% of supply) at about $0.15 per token, with the remainder allocated to the Binance team and angel investors. The fee discount percentage halves each year, and by year five, no discount remains. The token’s role has since expanded far beyond exchange fee reductions.
- ERC-20: The original BNB token standard, compatible with Ethereum wallets.
- Binance Chain: Launched April 2019, BNB became the native asset for transactions and governance.
- BNB Smart Chain (BSC): Introduced EVM compatibility and smart contract support.
How does BNB work on Binance and beyond?
BNB acts as a utility token within the Binance exchange and as gas for transactions on Binance Chain and BNB Smart Chain. On Binance, users can select BNB to pay trading fees, often at a discount. On-chain, BNB is required to pay for transaction fees, interact with decentralized applications (dApps), and participate in governance proposals.
BNB on Binance Exchange
When trading on Binance, users can opt to pay spot and futures trading fees with BNB. The standard discount is 25% off spot trading fees and 10% off futures trading fees (subject to annual changes). For example, if your spot trading fee is 0.1%, using BNB reduces this to 0.075%.
BNB on Binance Chain and BSC
On Binance Chain, BNB is used to pay for all on-chain transactions, such as sending tokens or creating new trading pairs. On BNB Smart Chain, BNB functions similarly to ETH on Ethereum, paying for gas to execute smart contracts and interact with DeFi protocols.
- Spot trading fee with BNB: 0.075% (vs 0.1% standard)
- Futures trading fee with BNB: 0.018% maker / 0.036% taker (with discount applied)
- On-chain BNB gas fee: Typically $0.05–$0.30 per transaction on BSC (varies with network usage)
Real-World Example
A trader executes $50,000 in spot trades on Binance in a month. The standard fee at 0.1% would be $50. By paying with BNB, the fee drops to 0.075%, totaling $37.50—a $12.50 monthly saving. On BNB Smart Chain, sending a BEP-20 token might cost 0.0005 BNB, worth less than $0.10 depending on market price.
What is BNB used for?
BNB is used for trading fee discounts, on-chain gas, participating in token sales, DeFi yield farming, staking, and making payments. Its role has expanded from a simple exchange token to a versatile asset across the Binance ecosystem and beyond.
Key Use Cases
- Trading fees: Pay spot and futures fees at a discount on Binance.
- On-chain gas: Pay for transactions and smart contracts on Binance Chain and BSC.
- Launchpad participation: Stake BNB to access new token launches.
- DeFi and staking: Provide liquidity or stake BNB for rewards on platforms like PancakeSwap and Venus.
- Payments: Accepted by select merchants and payment providers, including Binance Pay, Travala, and others.
BNB’s versatility means it is widely used not only by traders, but also by DeFi participants, NFT buyers, and users seeking blockchain-based payments.
How do BNB burns impact supply and price?
BNB undergoes quarterly burns, permanently removing tokens from circulation to reduce total supply. Burns are calculated based on Binance exchange trading volumes and, since 2021, via the BEP-95 mechanism that burns a portion of on-chain gas fees in real time.
Quarterly Burns
Each quarter, Binance commits to burning BNB until the total supply is reduced from 200 million to 100 million. For example, in Q1 2022, over 1.8 million BNB were burned in a single event. The amount burned is proportional to Binance’s spot and futures trading volumes.
BEP-95 Real-Time Burns
BEP-95, introduced in November 2021, burns roughly 0.1% of every BNB Smart Chain gas fee in real time. This ongoing reduction is similar to Ethereum’s EIP-1559 mechanism.
- Initial supply: 200 million BNB
- Target supply: 100 million BNB
- Burn mechanisms: Quarterly (off-chain) and BEP-95 (on-chain)
Real-World Example
Between July 2017 and early 2024, over 47 million BNB have been burned, reducing circulating supply and theoretically increasing scarcity. For instance, the 19th burn in January 2024 destroyed 2.1 million BNB, worth over $600 million at the time.
What are the risks and considerations for BNB holders?
BNB holders face risks including regulatory scrutiny, centralization, and smart contract vulnerabilities. As BNB is closely tied to Binance’s operations and reputation, any major disruption or legal action against Binance could impact BNB’s utility and price.
Key Risks
- Regulatory risk: BNB’s status as a utility or security token is debated in some jurisdictions.
- Centralization: Binance controls much of BNB’s infrastructure and validator set, especially on Binance Chain.
- Smart contract risk: BSC has experienced exploits in DeFi protocols; BNB value can be affected by ecosystem hacks.
- Exchange dependency: BNB’s core use cases depend on Binance’s ongoing operation and market share.
Key Insight
BNB’s value is uniquely tied to both exchange activity and on-chain utility, making it sensitive to Binance’s business performance and the health of its smart contract ecosystem. This dual exposure can amplify both upside and downside for traders.
Frequently Asked Questions
Is BNB the same as Binance Coin?
Yes, BNB was originally called Binance Coin. The ticker BNB now represents the native asset of both Binance Chain and BNB Smart Chain, and the term “Binance Coin” is used less frequently in official materials.
How can I use BNB for trading fee discounts?
On the Binance exchange, you can enable the “Use BNB to pay fees” option in your account settings. Eligible trading fees will be automatically deducted from your BNB balance at a discounted rate, typically 25% off spot trading fees.
What is the total supply of BNB?
BNB had an initial supply of 200 million tokens. Through quarterly burns and the BEP-95 mechanism, the supply is being reduced with a long-term goal of reaching 100 million BNB in circulation.
Is BNB required to use Binance Smart Chain?
Yes, BNB is required to pay for gas fees when making transactions or interacting with smart contracts on Binance Smart Chain (BSC). Without BNB in your wallet, you cannot complete on-chain actions on BSC.
What are the main risks of holding BNB?
Risks include regulatory uncertainty, Binance’s central role in BNB’s ecosystem, potential smart contract vulnerabilities on BSC, and the dependency on Binance’s ongoing operations and reputation in the market.
How does BNB differ from ETH on Ethereum?
BNB is the native token for Binance Chain and BNB Smart Chain, used for gas and ecosystem utility, while ETH serves the same role on Ethereum. BNB’s value is also tied to Binance exchange activity, unlike ETH, which is independent of any single exchange.
Key Takeaways
- BNB began as an ERC-20 token and now powers Binance Chain and BNB Smart Chain.
- Traders can save up to 25% on spot fees by using BNB on Binance.
- Quarterly and real-time burns reduce BNB’s supply, targeting 100 million tokens.
- BNB is used for trading, DeFi, payments, and token launches across the Binance ecosystem.
- Risks include regulatory scrutiny and Binance’s central role in BNB’s value.