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The cryptocurrency and blockchain industry is often abuzz with new ideas and concepts, ranging from NFTs to DeFi, but even complete newbies already realize that the space itself is vastly larger than even the sum of its parts. Still, the value of a project is often seen through its price alone, while its other advantages are overlooked or poorly understood.
Binance Coin (BNB), the token powering Binance Smart Chain, is one such example: often compared to ETH due to both coins serving a similar purpose, it is often considered inferior due to its place just under Ethereum by market cap. To understand whether this comparison is even justified, we will go through the similarities and differences between the two.
ETH powers the Ethereum ecosystem, which consists of many different projects built upon it, mainly during the 2017-’18 ICO boom. According to State of the DApps, out of around 2.7k dapps, most of them are games, followed by gambling, while finance comes in third.
BNB, meanwhile, has two different ecosystems: one in centralized finance (CeFi), in the cryptocurrency exchange Binance, and one in decentralized finance (DeFi), as the native token of Binance Smart Chain.
Number of Coins
Currently, there are more than 115 million ETH in circulating supply. This number could theoretically keep going up: the coin does not have a hard cap but a yearly cap of 18 million ETH, which is a quarter of the initial supply. This leads to all kinds of different possibilities regarding price changes, primarily due to supply and demand.
When it comes to BNB, there are currently more than 154 million coins in circulation. When the coin was first launched, Binance pledged to burn a total of 100 million BNB, which was around half the supply, to facilitate a corresponding increase in the token’s price. Although the team expects that it will take decades at this speed to finish the burn, they are looking at ways to speed it up and ultimately benefit BNB holders.
Speaking of holders, the biggest ETH holders—with millions of the coins in their accounts—tend to be large, well-funded projects, ranging from the Ethereum Foundation itself to projects like Tether. Ethereum does have a bustling community with more than 140 million unique addresses, but it may not be as involved in the network as enterprise-sized projects and teams are.
On the other hand, a quick look at the data on Etherscan shows that while the majority of the tokens are in Binance-owned wallets, the rest are scattered among likely unaffiliated addresses. The same site shows around 315k BNB holders; while this number is much lower than that of ETH, the more equitable distribution points towards a more democratized community.
Ethereum is currently in the middle of a shift from a Proof of Work consensus algorithm to Proof of Stake to make the network more environmentally friendly, faster, more scalable, and to offset the infamous Difficulty Bomb. This phrase refers to the mining algorithm difficulty increase, where miners will take longer and longer to solve increasingly complex puzzles, leading to a significant lag between blocks—called Ethereum’s Ice Age, which is a time when the network is expected to fully shift from PoW to PoS. This serves as a way to get miners disincentivized so that the PoW version does not fork away from the main Ethereum network.
Binance Smart Chain faces no such issues. Designed from the get-go to have quicker transactions and lower fees than what Ethereum offers, it is also Ethereum-compatible—for the users that want to make the best of both worlds. It uses the Tendermint BFT consensus, which is often used as the basis for modern takes on PoS, meaning it is not nearly as computationally heavy as any given PoW system.
Use Cases & Adoption
The Ethereum Virtual Machine is Turing complete, meaning practically anything can be run on top of it (if you try hard enough). Currently, most of its use cases revolve around dapps and DeFi. As we’ve already mentioned, the former is inundated with games and gambling, while the latter is still finding its feet in the face of already established traditional finance.
The BNB token’s use cases are already largely integrated into its very design (instead of being left completely to end-users). Within the ecosystem, they include payment, gas fees on BSC, staking, fundraising, earning—but also burning. On the exchange itself, they are used to pay for fees, and beyond that, they are also accepted as forms of payment through Point-of-Sale systems like PundiX and TravelbyBit, or for goods and services through Crypto.com.
Although ETH has a significant place in the cryptocurrency industry as a whole, its use cases are predominantly dependent on the network’s end users. BNB, however, already has many different use cases embedded into its core, but it is also highly versatile: as the team puts it, “The longer-term vision for BNB is for it to become the native token on multiple application-specific blockchains.” However, BNB is for using and not tucking away: since it’s not a security (it doesn’t represent any ownership in any of its native projects, nor is it a type of debt), the number of those use cases is expected to infiltrate every relevant aspect of the industry. The price itself is admittedly expected to rise—but it is also expected to become less relevant as participants start using the tokens within their ecosystems instead of a price speculation tool.
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