2021 has been an impressive year for Binance Coin (BNB), which has so far grown by over 900%.
One of the most important drivers for BNB’s growth has been the constant congestion in the Ethereum network. As this conflict continues, Binance Smart Chain (BSC) has emerged as an alternative to meet the demands of the fast-growing decentralized financial sector (DeFi).
When BNB reached $ 64 billion in market value, it overtook traditional banks, including Santander, Bank of Montreal and UBS. Meanwhile, some analysts point to the estimated value and effect of Coinbase’s upcoming direct listing (valued at $ 100 billion) as a catalyst for BNB’s price increase.
A popular version that has emerged in recent weeks is that the direct introduction of COIN also increases the value of the central exchange tokens. Analysts also speculate that other regulated US exchanges such as Kraken and Gemini are likely to follow Coinbase’s management and try to raise money by offering shares.
To understand the potential of BNB, one must first understand the difference between stocks (arrows). Once this is found, potential drivers can be analyzed to quantify BNB.
BNB does not represent the Binance share
The BNB token gives holders a discount on the trading fee and is important for those who want to participate in the Binance Launchpad Token Sale. As liquidity has grown, BNB has also become the base pair for other cryptocurrencies on the Binance exchange.
Over time, as Binance’s smart network took hold, other uses have emerged. For example, BNB can cover network costs and act as a token in an ecosystem that includes decentralized apps and games (dApps).
Binance periodically burns some non-negotiable BNB tokens based on the total trading volume on the stock exchange. The effectiveness of this strategy was reduced over time as investors realized that these destructive tokens had not entered the circulating supply.
Binance Smart Chain uses proof of effort, which eliminates the need for miners or expensive transaction fees. The platform is compatible with Ethereum Virtual Machine (EVM) and has the same token and smart contract structure.
Several cryptocurrencies (or cryptocurrencies) have been given a prominent role in the Binance networks, allowing users to bypass mining. Another benefit of the Binance Smart Chain BEP-20 model is the strengthening of the vast network of decentralized applications, including PancakeSwap DEX and the Venus lending platform.
Closed classification of the total costs for decentralized financing. Source: DeBank
As explained above, Binance Smart Chain acquires other DeFi protocols in terms of total locked value. Consequently, new use cases for the BNB token emerged and took the central scenario when agriculture, liquidity pools and base pairs used the token throughout the network.
Banks are reliable distributor suppliers, but DeFi can bypass the system
Shareholders in the share capital have the right to receive part of the net profit of listed companies. This amount will vary from quarter to quarter, as the board may decide to repay the debt or include some of the money in reserves. However, banks are known to have cash cows and are therefore usually a reliable source of dividends.
Santander’s (SAN) dividend has been paid over the past 12 months, divided by current earnings of 3.7% per share, and the shareholders of the Bank of Montreal (BMO) made a similar profit. Revenues for Swiss UBS decreased in 2020, but have historically been on average 5%.
The bank’s shareholders actually have the right to vote at shareholders’ meetings, and minority groups can block actions that could harm them financially. On the other hand, these shareholders are 100% dependent on the bank’s bottom line and growth.