2021 has been an impressive year for Binance Coin (BNB), which has so far recovered by more than 900%.
One of the main drivers of BNB’s growth was the continued congestion on the Ethereum network. As this fight continued, Binance Smart Chain (BSC) emerged as an alternative, meeting the demands of the rapidly growing decentralized finance (DeFi) sector.
As BNB reached a market capitalization of $64 billion, it has outperformed traditional banks, including Santander, the Bank of Montreal and UBS. Meanwhile, some analysts point to the estimated value and impact of Coinbase’s upcoming direct listing ($100 billion valuation) as a catalyst for BNB’s price hike.
A common narrative that emerged in recent weeks is that COIN direct listing is also adding value to centralized exchange tokens. Analysts also speculate that other US-based regulated exchanges such as Kraken and Gemini will likely go the way of Coinbase and attempt to raise funds through a stock offering.
To understand the potential of BNB, one must first understand the differences between stocks (stocks). Once this is clarified, it will be possible to analyze the possible drivers of the appreciation of BNB.
BNB does not represent Binance shares
The BNB token offers holders a discount on trading fees, and is mandatory for those who wish to participate in Binance Launchpad token sales. As BNB gained liquidity, it also became a base pair for other cryptocurrencies on the Binance exchange.
Over time, other uses emerged as the Binance Smart Chain gained ground. For example, BNB can cover network fees and serve as a utility token in the ecosystem, which includes decentralized applications (dApps) and games.
Binance periodically burns (destroys) some of the non-circulating BNB tokens based on the overall trade volume of the exchange. The effectiveness of this strategy waned over time as investors understood that these destroyed tokens never entered the circulating supply.
The Binance Smart Chain network uses a proof-of-stake authority that eliminates the need for miners or expensive transaction fees. The platform maintained its compatibility with Ethereum Virtual Machine (EVM) and has a similar token and smart contract structure.
Many tokenized (or pegged) cryptocurrencies have gained prominence on Binance networks, allowing users to bypass miners’ fees. Another benefit provided by Binance Smart Chain’s BEP-20 model is the participation and farming capabilities in its vast network of decentralized applications, including the PancakeSwap DEX and Venus lending platform.
As shown above, Binance Smart Chain has been gaining ground over other DeFi protocols in terms of total locked value. Thus, new use cases for the BNB token emerged to take center stage as agriculture, liquidity pools, and base pairs used the token across the network.
Banks are trusted dividend providers, but DeFi could outperform the system
Equity shareholders are entitled to a portion of the net profits of publicly traded companies. This amount will vary from quarter to quarter, as the board of directors can choose to pay off the debt or add part of that money to reserves. However, banks are notorious cash cows and therefore are often a reliable source of dividend payments.
Santander (SAN) dividends paid over the past 12 months divided by the current share price show a 3.7% gain, and Bank of Montreal (BMO) shareholders received a similar return. Yields at Switzerland-based UBS were down in 2020, but have historically averaged 5%.
Bank shareholders do indeed have voting rights at shareholders’ meetings, and minority groups could block measures that would hurt them financially. On the other hand, these shareholders are 100% dependent on the bank’s net income and growth.
BNB, on the other hand, could survive without the direct influence of the Binance exchange. In the future, if Binance Smart Chain achieves independent developers and validators, its ecosystem could continue to prosper. In theory, if the token loses its dependency as the ecosystem grows, it becomes less centralized.
Done right, BNB’s market capitalization could exceed that of the entire traditional banking system, but before this happens, these decentralized networks and applications must gain adoption and demonstrate that they can address the needs of major investors. and bank customers.