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Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.
We talked about Bitcoin and Ethereum, number 1 and 2 in market cap, extensively. Let’s spend some time exploring the rest of them! Today: Binance Coin, which currently is number 3 in market capitalization!
Binance Coin is a token that was originally issued as an alternative payment method on the parent company’s crypto exchange. The Binance exchange simply offered lower transaction costs to anyone using their token.
As Binance grew into one of the largest exchanges in the world, the vision for the token expanded. It eventually morphed into an alternative to Ethereum, meaning that it lets developers build Decentralized Finance products – short: DeFi – with smart contracts. Make sure to check out our episodes on Defi and Smart Contracts.
While both have the same goal, the Binance blockchain wants to solve the key problems that Ethereum still faces: Low transaction volume and high transaction costs. And it does so in a unique, and sometimes criticized way: It centralizes control.
The company itself chooses who gets to validate transactions, giving that privilege to only a handful few. That makes transactions fast and cheap in theory. In fact, they are about a whopping 80 times cheaper than Ethereum right now. In addition, Binance also has the power of blocking smart contracts to decrease fraud.
But is it too risky to trust a single company with managing almost 100 bn dollars in circulation? We’ll leave that judgement up to you. But it certainly makes Binance Coin unique among many others.
And next time, we’ll talk about Tether, which currently sits at #4 in market capitalization.
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