Binance Coin (BNB) has seen a strong increase in price, while Bitcoin is still trading in a range. But what is the explanation for this success despite the fact that the Binance exchange is taking one blow after another from regulators all over the world?
The Binance Smart Chain is adding value
BNB started as an ordinary ERC-20 utility token and moved over to its own blockchain several years after Binance was founded. But that was not enough. Since Binance set the goal to deliver a smart contract platform the Binance Smart Chain was born. While BNB can be transferred on both chains, it is the Smart Chain that is adding value.
According to the platform DeFiLama, the Binance Smart Chain runs 145 different protocols, and the total value locked on-chain is worth over 20 billion US-Dollar which is about 18 billion Euros. And this is exactly why BNB is seeing such a tremendous increase in price.
Of course, its competitor Ethereum is leading the market with a TVL that is almost nine times higher, but the Binance Smart Chain is the number 2 smart contract platform in the world. With Solana catching up in terms of TVL and the total number of protocols, this might change in the future. But for now, the BSC is playing de facto a more important role in the market.
BNB burn continues
The fact that BNB is the native token on the smart chain adds a strong use case and demand. But this is only one side of the coin. On the other hand, the supply is constantly decreased by the so-called BNB burn.
The idea is simple. The company uses a part of its profits and destroys BNB tokens which are bought back. In effect, the supply of BNB is shrinking over time. A clever mechanism that creates more demand with every additional use-case, while at the same time slowly decreasing the available amount on the market.
Regulation hits hard
But wherever there is light there is also a shadow. Regulators all around the world have issued bans and statements regarding the activity of Binance in the respective countries. Among them were Great Britain, Germany, Japan, and even the Netherlands.
It remains to be seen if Binance can stay on top of the game ever since the international pressure is increasing. A negative outcome could affect BNB, which is a blockchain that is 100 % affiliated and associated with the company. For now, the market is undisturbed by the company’s struggle with international regulators.