Cryptogram-19AUG2022

Binance Coin: Should you invest? |Technical Analysis

19 August 2022

In this issue

Hello, It’s time again to get geeky on Cryptogram. After spending the past couple of weeks on drama around insider trading, money laundering, and infighting in the crypto world, this week we will get down to sober technical analysis. All drama and no research makes Jack a lazy crypto investor. So, on this issue… Subject: Binance Coin (BNB). Objective: helping you decide if you should invest in BNB. Let’s roll.

Sidebar: here’s our how-to on choosing the right coin to invest in, published back in June 2022.

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

Was this newsletter forwarded to you?

THE BIG STORY

Should you invest in Binance Coin

Coin basicsBinance is a global crypto exchange that provides a system for users to spot-trade crypto assets. Exchanges are one of the few businesses that have strong network effects, because liquidity attracts more liquidity. That is why most nations only have one dominant stock exchange, as this is the natural market equilibrium. Given the international nature of crypto trading, there is natural pressure toward one dominant global crypto-to-crypto exchange, like Binance. Similar to ThePirateBay, Binance is able to “sail” across the internet, set up operations across many jurisdictions, and work directly with regulators to create jobs and generate tax revenues.In June 2017, the company launched the initial coin offering (ICO) for its native token, Binance Coin (BNB). This was renamed this year to BNB Chain (BNB referring to ‘build and build’). Since then, the company has grown the platform to become the world’s highest volume crypto exchange.

Binance plans to leverage its market-leading position as a centralised exchange to dominate the decentralised exchange (DEX) space as well. In March 2018, Binance announced plans to launch BNB Chain, a blockchain with a native on-chain decentralized exchange. Binance expects the chain to increase the value of BNB (causing the value of the company’s large BNB holdings to grow in value).Here is BNB’s whitepaper. Numbers

People and organisationThe Binance team is one of the most technical, business-savvy, and well-capitalized organizations in crypto.Binance CEO Changpeng Zhao, better known as “CZ,” is one of the most popular and influential entrepreneurs in the crypto ecosystem. He is seen as a thought and market leader, with somewhat of a cult following. He has nearly 7 million followers on Twitter. He found a spot on Bloomberg 50 in 2020, a coveted list of the 50 most-influential entrepreneurs in the world. He is one of the richest people in the cryptocurrency sector.

Among its institutional investors, Binance counts Jump Capital, LuneX Ventures, Multicoin Capital, and M31 Capital.But Binance sure has had its run-ins with law, with allegations of money laundering and having weak checks and balances to detect fraud. Here’s a detailed story on that. Most of us will be familiar with the recent fiasco between Binance and WazirX.It is not widely known where Binance’s servers are hosted, making the exchange itself quite difficult to censor. Additionally, it is unclear which government has jurisdiction over Binance, if any. The company’s financial assets exclusively comprise cryptocurrencies such as BTC, ETH, and BNB.Binance team has already moved jurisdictions 5 times: beginning in Hong Kong, followed by moves to Singapore, Japan, Taiwan, Cayman Islands, and Malta.

VibeBinance has a strong vibe with its followers. The platform offers 24/7, world-class customer support, inspiring tremendous brand loyalty.In July 2018, Binance announced that it would create a Secure Asset Fund for Users (SAFU), wherein the company would deposit 10% of all trading fee revenue into an insurance fund to offer protection for users in the unlikely event of an exchange hack. About 90% of Binance’s employees receive a portion of their salaries in BNB. That such a large percentage of Binance’s employees are betting on BNB is an incredibly bullish signal for the token.Twitter Followers: 9,316,393Reddit Members: 874,623

TokenomicsBNB was launched as an ERC-20 token issued on top of Ethereum. The team distributed the 200 million tokens in the following manner: 1. Binance retained 80 million BNB (40% of the total supply) in order to fund exchange operations. These tokens vest on a 4-year schedule: 20% released at launch, with a subsequent 20% release each year. 2. 100 million BNB (50% of the supply) were sold to the public in the ICO. 3. 20 million BNB (10% of the total BNB supply) were allocated to angel investors

Price: $310-$325 rangeAll-time High: $675Circulating Supply: 161 million Average Daily Volume: $950 millionSpecial MentionsBinance pioneered the discount token model, which is one of the few ways Layer-2 tokens will capture value. Using BNB, users can discount fees that they owe the exchange for their trades up to 25%.BNB also pioneered the use of an auto-burn system (BNB uses an auto-burn system to reduce its total supply to 100,000,000 BNB (50% of launch liquidity). The BNB auto-burn mechanism adjusts the amount of BNB to be burned based on BNB’s price and the number of blocks generated on BNB Smart Chain (BSC) during the quarter. This offers greater transparency and predictability to the BNB community.BNB Chain is the future of Binance. It is expected that the majority of trading volume will eventually migrate to the BNB Chain’s DEX, though this transition will take a few years.DEX LaunchBinance is the first, large centralized exchange to shift its focus entirely to building a decentralized blockchain. While others such as Bitfinex (EOSfinex) and Coinbase (Paradex) have also launched or are in the process of launching decentralized exchanges, their goals are to prioritize centralized exchange operations over the DEXs. Binance is specifically looking to disrupt itself by porting as many of its existing users over to the DEX as possible, diminishing its centralized exchanges’ customer base in the process.

Was this newsletter forwarded to you?

  THE TOP FIVE 

Stories from this week you cannot miss

  EXPLAIN, PLEASE 

Demystifying the world of cryptocurrency

This week, we explain SHARDING.Ten years ago, Bitcoin was an arcane network mostly made up of geeks. Today, hundreds of thousands of transactions happen every day on the network. Being a decentralised network, if every node of the network has to validate a transaction, imagine how much computational power and energy will have to be spent on the network. And even more so when the network usage scales up. So, how can we solve this problem? One of the ways is sharding. Sharding is a way of reducing computational power and energy spent on validating transactions on a crypto network, by creating partitions in the network, called “shards”, and making only the nodes in those networks responsible for the validation. This way, not all the nodes of a network are responsible for all the transactions. The validation information contained in a shard will still be shared with other nodes, which ensures that the ledger remains decentralized and secure. So, everyone can see all the ledger entries, they simply don't process and store all the information.That’s it for this issue folks, see you around next time!

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Was this newsletter forwarded to you?