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What makes these two currencies unique, and why is it necessary for Binance to have both of them?
Is BNB equivalent to BUSD?
Binance established both BNB and BUSD, however, they fulfill distinct functions. BNB is the Binance Exchange and Binance Smart Chain’s utility token, and you may use it to complete transactions (swap BUSD to BNB) and earn trading fee savings on Binance. In contrast, BUSD is a stablecoin whose value is fixed to 1 USD that may be used in the cryptocurrency market.
Here is a comprehensive comparison of these two cryptocurrencies:
Binance was designed as the utility token for the Binance platform. Initially, it was just utilized to receive a reduction in trading fees. This meant that if you paid for your trading costs with BNB rather than the currency you were trading in, you would be eligible for cheaper fees.
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Binance did state that, beginning in the fourth year, the trading fee reduction would gradually decline (from 25% to 6.75%), but they will maintain the 25% discount until 2022.
In addition, with the launch of the Binance Smart Chain, the BNB use case has extended, since it now drives the whole Binance ecosystem.
On the Binance Smart Chain, several various initiatives have been initiated, with Pancakeswap being the most well-known.
When engaging with the Binance Smart Chain, BNB is also utilized to authorize the transactions you want to do.
The BUSD stablecoin
In the meanwhile, BUSD is a stablecoin where 1 BUSD is intended to equal 1 USD. Compared to other stablecoins such as USDT, BUSD’s reserves consist of a greater proportion of cash and cash equivalents (96%).
In comparison, just 2.9% of USDT’s reserves are in cash!
As a stablecoin, the value of BUSD is backed by the value of the US dollar. Theoretically, when you redeem 1 BUSD, you should be able to obtain 1 USD in exchange.
BUSD has always been subject to stringent regulations, and they comply with the New York State Department of Financial Services (NYDFS).
BUSD is mostly used as a trading pair with other cryptocurrencies and to generate interest.
Corporations supporting BNB and BUSD
The Binance Coin (BNB) was launched in 2017 with the Binance exchange.
In the meanwhile, Binance cooperated with Paxos, a New York-based financial firm, to develop BUSD.
Paxos has BUSD reserves, which are all the US money that support the BUSD.
BUSD was launched in 2019, which is two years later than BNB.
Stability of cost
BNB will see more price swings than BUSD. This is because BUSD is a stablecoin, therefore 1 BUSD should equal 1 USD.
Binance has also been destroying BNB tokens by purchasing a chunk of them back and then destroying them. This will theoretically restrict the supply of BNB, which may result in price fluctuations.
BNB will thus be the more volatile token to possess. However, if you trust in the Binance ecosystem, you would be certain that BNB would appreciate it over the long run if you keep it!
Existing trading pairings
Since they were both developed by Binance, you may use either one to purchase the majority of cryptocurrencies on the site. However, the price of BNB is more erratic, which might impact the amount of bitcoin you purchase, while the price of BUSD is more steady.
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