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On January 19th, the crypto trading platform Binance announced its BNB burns in the new quarter. According to the white paper, Binance has completed the 14th BNB destruction, totaling 3,619,888 BNB (including 3,609,050 BNB burned by Binance + 10,838 BNB used in the BNB anti-black hole plan), with a value of more than 165 million U.S. dollars. Changpeng Zhao (CZ), the founder of Binance, also stated that the destruction speed will be accelerated in the future, shortening the time from more than 20 years to about 5-8 years to complete the destruction of 100 million BNB. After the news was announced, the BNB price immediately hit an all-time high of 47.16 US dollars, which performed particularly well among the platform tokens. Behind this, in addition to the reasons for the rise in the market, there should also be several core driving factors that point to different business sectors of Binance, including but not limited to: increased trading revenue, Binance new coin mining, and coin Annchain and Binance Smartchain’s territory expansion, etc. This article aims to explore the above-mentioned empowerment of BNB’s core value, and present some important trends from the data dimension.
BNB burned quarterly, the vane of the market
In the traditional securities market, there is a popular saying: Chunjiang Plumbing Duck Prophet, which means that brokerage stocks are like the weather vane of the stock market. When the market is turning point, it will often start first and point out the direction. In the cryptocurrency market, platform coins undoubtedly play a similar role, and changes in market trading activity can be quickly and directly reflected in their value trends. The reason is that in the economic model of most platform currencies, the design of repurchase/destroy/dividend based on exchange revenue is incorporated. As a platform token issued by Binance in 2017, BNB has always occupied the top spot in the platform currency sector and has attracted the most attention from the market.
Regarding the rights and interests of holders, Binance is the first platform with a “repurchase and destruction” model. Its original white paper stipulates that Binance will use 20% of the company’s profit every quarter to buy back and burn BNB until the total is reduced to 100 million. In 2019 and 2020, some details were updated, such as changing the base to the current quarterly transaction volume of Binance platform, starting from the 8th burn, giving up the BNB share held by the team and adding it to the BNB quarterly burn plan , And the “Binance Anti-Black Hole Plan”, a plan to compensate users for losses caused by operational errors when transferring assets.
It is very important to understand the destruction plan because it is the most basic but also the core point that reflects the value of BNB at this stage. At this level, industry researchers often use a relative indicator to evaluate and observe it, namely Price to Burn, which is commonly used in Chinese instead of market-sales ratio. Of course, this is not the same thing as the traditional Price to Sales ratio. Specifically, its calculation formula is the market value of platform currency/the value of destruction in the past year.
Taking this burn as an example, based on the BNB price of 47 US dollars, the circulating market value and total market value of BNB after burn are 6.631 billion US dollars and 8.015 billion US dollars respectively. In addition, the total burn value in the 4 burning records in the past year is 100 million 327 million US dollars. Then, corresponding to the market-sales ratio, we can get a Floating Price to Burn of 19.12 (based on the circulating market value) and Diluted Price to Burn of 23.11 (based on the total market value). It can be understood that, assuming that the trading volume of the platform will remain at the same level in the next year, it will take 19.12 years to destroy the remaining BNB in circulation, and 23.11 years to destroy the remaining total.
BNB burn history Source: Binance Drawing: Cointelegraph Chinese
The amount of BNB burns this time has increased by 61% compared to the previous quarter (the third quarter of 2020), which is the most burned among the 14 burns in history. The current total amount has been reduced to its original total issued (200 million) 85.27% of BNB, or about 15%, have disappeared permanently.
Behind the data reflects the substantial increase in platform revenue. If the same calculation is carried out according to the 20% quarterly profit rule (in fact, it has been changed to 20% of the transaction volume from Q3 of 2019), Binance’s profit in the fourth quarter of 2020 should hit a record high of nearly 800 million US dollars. From the perspective of valuation, BNB’s current price-to-sales ratio (Price to Burn) is low to a reasonable level, whether it is based on the circulating market value or the total market value, it is lower than 25 (to a certain extent comparable to the traditional price-earnings ratio P /E), and lower than the previous average. This means that Binance’s trading business can fully support the current valuation of BNB, and the future growth potential is very strong.
Launchpad and Launchpool go hand in hand for the benefit of Binance users
In addition to the initial trading business, Binance has continued to iterate on itself in the past few years, expanding its business landscape to other areas, and Launchpad and Launchpool are important parts of it.
Binance is a Launchpad business launched on a large scale in early 2019. The industry usually uses the term IEO (Initial Exchange Offering) to describe it, that is, the exchange supports the launch of projects and raises funds in the form of platform tokens. Binance was not only the first IEO platform at the time, but also won the imitating of many exchanges. The explosion of its IEO sector also directly boosted the market that had been sluggish at that time. According to statistics from cryptorank.io, since January 2019, Binance Launchpad has launched 19 projects, raising a total of US$71.07 million, and a single project has raised an average of US$4.18 million. From the perspective of the rate of return, most of these projects have won considerable benefits for IEO investors after they were launched on Binance. The current average ROI is nearly 10 times, and the average historical ROI is as high as 15 times. Comparing with Huobi and OKEx based on the same dimensions, Binance IEO is in the best situation, with each data significantly surpassing friends.
Comparison between IEO business platforms Source: cryptorank.io Drawing: Cointelegraph Chinese
While providing support for high-quality blockchain projects, Binance IEO is also strongly empowering BNB itself. BNB is the only fundraising currency in the entire process. Intended investors must hold a certain amount of BNB and have a holding period requirement. This directly exerts the utility of the platform token and provides benefits for the BNB price from the supply and demand sides.
Launchpool is a DeFi mining platform under Binance Launchpad. In Binance’s own words, it is “Binance New Coin Mining-a safer asset reward model”. In June last year, the rise of liquidity on Ethereum made DeFi attracted a lot of attention unprecedentedly. Binance responded quickly and launched the Launchpool platform in October of the same year to support users to mine token rewards with various assets such as BNB and BUSD. As of January 19, 2020, Launchpool has launched 13 high-quality projects. From the BNB prize pool alone, the total amount of BNB deposited is as high as 87.02 million (average 6.69 million), with an average annual return rate of 15%, and 8 completed projects The total number of participants reached 290,000 (an average of 220,000).
Status of Binance Lauchpool Project Source: Binance Drafting: Cointelegraph Chinese
Similar to Launchpad, the Launchpool platform directly increases the utility of BNB, allowing token holders to easily obtain additional benefits without any complicated operations and costs. In addition, projects on Launchpool usually must be based on or support the Binance Smart Chain (BSC), which also continues to absorb new members for the Binance ecosystem.
A number of businesses blossomed and continued to empower BNB tokens
In terms of technology, business, security, data, and many other dimensions, Binance is rare in the industry. It will invest a lot of capital and development resources and pursue an innovative platform without imitating others. Examples are endless. The most representative ones are the Binance Chain and Binance Smart Chain independently developed by Binance, which have finally blossomed in the past few months.
Binance’s decision to develop a public chain can be traced back to March 2018. At that time, Binance stated that in the future, Binance will realize the conversion from enterprise to community, and BNB will also upgrade its mainnet from ERC 20 tokens to become Coin and become a chain. On the fuel (Gas). This vision seems to have been achieved to a large extent today, but looking back at the time, Binance has only been online for half a year and its foundation is not stable. It is not easy to propose this ambitious plan and put it into practice. . As of January 19, the number of addresses on Binance Chain has reached 934,634, and nearly 200 million transactions have been completed, which is faster and cheaper than many blockchains. As the only fuel, BNB plays its role in every transfer transaction.
Binance Smart Chain (BSC) is an Ethereum-compatible smart contract blockchain launched by Binance in the second quarter of last year. In the words of founder Zhao Changpeng (CZ), “The development of BSC has gone through a long time, but it has encountered the best market opportunity”. With the rapid development of DeFi, the problem of congestion and expensive fees on Ethereum has become more and more serious. As the choice to support Solidity smart contracts, BSC has seized an important window of development during this period and has released more than 60 DeFi platforms such as PancakeSwap and Burger. Under the popularity of the project, it has achieved explosive growth beyond expectations. The liquidity lock-up of these ecological projects and the payment of trivial miner fees on BSC have further enhanced the practical value of BNB. It can be said that Binance Smart Chain interacts with ecological projects to achieve a win-win cooperation model.
Data on Binance Chain and Binance Smart Chain (as of 2020/12/29) Source: Binance News Drawing: Cointelegraph Chinese
In addition, financial services such as Binance Wealth Management, Binance Mining Pool, and Binance Liquidity Mining have also enriched the usage scenarios of BNB and added benefits to coin holders. Compared with pure holding, various activities on the platform can provide BNB users with an annualized rate of return of about 6% to 10%.
Binance, as a unicorn company that has only been established for a few years, perfectly interprets the term “opportunity and creation”, and this happens to be very close to the theme given by Binance in 2020. The reason why Binance can become an industry’s top cryptocurrency exchange and one-stop blockchain platform in a short period of time is inseparable from its rapid insight into market changes, the courage to be the first, self-subversion and user-oriented spirit. The continuous expansion and empowerment of the BNB ecosystem also gives users reason to believe that it can have a broader value growth space in the future.