By keeping the investment in cryptocurrency, rather than exchanging it for a fiat currency, it increases the liquidity in the crypto economy.īUSD is an ERC-20 token and has BEP-2 support, meaning it can operate on platforms that use Ethereum and Binance Smart Chain. If a trader expects the price to drop, they can switch it to BUSD to protect their holdings. People mainly use stablecoins as a safe haven from a volatile cryptocurrency. What is Binance USD coin used for?īinance said the early adopters of BUSD trust it for their decentralised finance activities, using it as a bridge between traditional and decentralised finance. There are plenty of US dollar-pegged stable coins, but Binance USD has seem to become one of the most popular. Meanwhile, its price changes slightly to keep in line with US dollar. It also means Binance USD’s market capitalisation can clearly indicate demand for the token. It is because of this system that BUSD coin does not have a regular minting schedule. When someone decides to sell 50 BUSD, $50 is taken from the treasury and the equivalent BUSD is burned. For example, when 50 BUSD is bought, a $50 payment is added to the Paxos treasury.
To maintain this ratio, the Binance USD cryptocurrency uses a deflationary mechanism. At the time of writing, the total supply of BUSD is 14.38bn, meaning Paxos holds $14.38bn. The blockchain infrastructure platform holds the same number of US dollars as the total supply of BUSD. Binance USD’s market capitalisation in US dollars How does Binance USD work?īinance USD has a unique tokenomics (aka token economic) system that has allowed it to keep the price equal to one US dollar and its partnership with Paxos is key to this. Since August 2020, it has steadily climbed up the cryptocurrency rankings, so that at the beginning of 2022 it was the 15th largest cryptocurrency by market capitalisation. With the trust from regulatory bodies and the world’s largest crypto exchange behind it, the Binance USD cryptocurrency started to make a name for itself. The state had previously proved to be harsh on cryptocurrencies, with crypto organisations required to have a “ BitLicense” to operate in the area. In January 2020, BUSD received approval from the New York State Department of Financial Services, a New York regulation department known to be rigorous. It is also providing a convenient way for users to switch between assets without moving off the blockchain.īinance’s aim was to create a cryptocurrency that was trusted worldwide by its users and regulators. Users can start investing in cryptocurrencies and blockchain technology without concerns about volatility. The defining characteristic of this coin is that one BUSD is equal to one US dollar.īUSD is bridging the gap between traditional finance and cryptocurrencies. Binance formed a partnership with Paxos in September 2019 to create its own stablecoin, called Binance USD (BUSD).
The exchange launched its own coin in 2017, but this time wanted to create a more stable cryptocurrency. What is Binance USD (BUSD)?īUSD is not Binance’s first cryptocurrency. Investors have started to take note as the stablecoin has climbed its way into the top 20 cryptocurrencies by market capitalisation. The support of the world’s largest crypto exchange and the approval of a stringent regulatory body has proved to be a compelling appeal for investors.Īs BUSD is a stablecoin, investors will not be able to profit it off its volatility, but the coin could still be a worthy addition to a portfolio. Stablecoins have combined the steadiness of traditional finance and the decentralisation of cryptocurrencies.īinance USD (BUSD) was not the first stablecoin but it is certainly building itself up to be one of the most used. The cryptocurrency industry’s volatile nature has warned off many investors, until stablecoins came along.
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