To reward investors and the platform founders, Binance plans to skyrocket the value of their BNB tokens in the long-term. BNB tokens act as Binance shares, except instead of paying out dividends to the holders, Binance will use various methods to increase the value of BNB. This allows Binance to effectively give money to BNB holders, without actually having to send anything. If you’re interested in joining in on Binance’s success, you can use this guide to learn how to invest in BNB.
Originally, 200 million BNB tokens were created; 100 million tokens were sold to the public, while the other 100 million went to private investors and the founding team. Although the team holds a large portion of the tokens, they won’t able to crash the market by dumping them. Currently, the founding team is only able to access 20% of their BNB allocation. The remaining 80% will be distributed at a rate of 20% per year – Binance will be operating for 4 years before the team is able to sell all of their BNB. To ensure their tokens are worth a pretty penny after 4 years, Binance are using the following 3 methods:
1. Trading fee reductions
Binance users receive a 50% discount on trading fees when they pay with BNB. As you would basically be throwing away money by not using BNB, practically all Binance users have BNB in their wallets. Currently, this is the biggest source of demand for BNB and it is only going to get bigger in the future.
As more people join Binance, the demand for BNB will increase as they buy some to cover their trading fees. At the same time, the circulating supply of BNB will effectively shrink as more users will be holding onto the tokens. The increasing demand in conjunction with the shrinking supply will cause the value of BNB to rapidly shoot upwards as the platform grows.
2. Coin burning
Binance has stated in their white paper that they will spend 20% of the profits they’ve earned each quarter on BNB tokens and then destroy them. By reducing the total supply of BNB, each remaining token becomes more valuable.
Binance has performed two coin burns so far: one in October 2017, and another in January 2018. In October, 986,000 BNB were destroyed, an amount equal to $1.5 million at the time. This number rose to 1,821,586 BNB in January – worth $36.4 million at that point. Therefore, Binance have already destroyed 1.4% of the total BNB supply with only 6 months of profits.
Binance has been growing exponentially since it launched; reaching a total of 7 million users in February. More than 2 million of these users were gained in 2018 alone. This growth is reflected in their quarterly profits, which increased from $7.5 million in Fall 2017 to $182 million in Winter 2018. The coin burns are therefore going to get bigger in the future, destroying larger portions of the overall supply and making the value of BNB rise at an increasing rate.
3. Special and future uses
BNB tokens can also be used in a few other ways, such as voting for the community coin of the month, or adding content to Binance’s new “Binance Info” section. While these uses for BNB are pretty minor, they show that Binance is interested in continually expanding the tokens’ utility.
One future use that could have a huge effect on the value of BNB tokens is the ability to use them to pay withdrawal fees. Binance lists this as a possible use of BNB in their white paper, but it hasn’t been implemented yet. Withdrawal fees on Binance can be a significant cost – much more so than trading fees for a lot of users. If the ability to pay for withdrawal fees with BNB was implemented, their value and demand would increase massively.
With the combination of these methods, the value of BNB tokens will see a steady increase over time as the Binance exchange gains more users and becomes more successful. It’s obvious Binance is dedicated to realizing this increase, if only because their payday depends on it. For help investing in BNB tokens, you can look at this step-by-step guide for investing in cryptocurrencies.
This growth is reflected in their quarterly profits, which increased from $7.5 million in Fall 2017 to $182 million in Winter 2018.
How is it possible to know your profit in winter 2018 since we’re only in April 2018 now?