What is Binance USD? You’ve probably already encountered BUSD if you’ve bought or sold cryptocurrency on Binance. The trading pairings that Binance provides on its exchange frequently include the token. In essence, BUSD is pegged to the value of the US dollar and functions as a digital representation of it.
It’s not always clear to newcomers why traders and investors retain BUSD. However, the role of BUSD and other stablecoins is a crucial component of the cryptocurrency ecosystem.
What is Binance USD (BUSD)?
A stablecoin backed by fiat money and linked to the dollar is called Binance USD (BUSD). As a result, one BUSD is equal to one USD. One of the stablecoins with the largest market caps at the moment is BUSD. Binance and Paxos founded it.
According to trade volume, Binance is the world’s biggest cryptocurrency exchange. Changpeng Zhao, a cryptocurrency billionaire, launched it. In addition, he developed the BNB Chain (BNB), formerly known as the Binance Chain, the second-largest smart contract platform in terms of market value after Ethereum.
Background of Binance USD
Binance is a crypto exchange (cryptocurrency/cryptocurrency) founded in 2017 by Changpeng Zhao in China. Binance is the world’s largest crypto exchange in terms of trading volume.
Paxos is a New York-based blockchain technology firm. The company offers cryptocurrency brokerage, crypto assets, and payment services. “Stablecoin as a Service” is a Paxos service. They provide the infrastructure and technology so companies can develop a stablecoin. In addition, New York State Department of Financial Services (NYDFS) approved three asset-backed tokens issued by Paxos: Paxos Standard (PAX), PAX Gold (PAXG), and BUSD in September 2019.
Binance used the Paxos service to create the stablecoin BUSD. Binance does not need to focus much on the technical part and related procedures but can completely focus on building the brand and ecosystem around BUSD.
How Does Binance USD Work?
BUSD’s peg is easier to maintain than other stablecoins. Reserves allow traders to convert BUSD to USD with the 1:1 ratio. Sending BUSD to Paxos will burn your tokens and give you fiat currency. This approach keeps supply and reserves equal.
Arbitrage traders will buy lots of BUSD once the price falls below $1 for 1 BUSD. At $0.98, they could make a profit. The arbitrageurs can utilize Paxos to exchange their BUSD purchases for fiat. Due to high BUSD demand, the token BUSD price returns to $1, restoring the 1:1 peg.
What Problems Does Binance USD Solve?
Binance USD is a stablecoin that aims to provide a more stable and convenient alternative to other digital assets. It does this by pegging its value to the US dollar, providing users with a more stable way to store and transfer value. Additionally, Binance USD can be used to trade on Binance, providing users with a more efficient way to access the platform’s benefits.
The Binance USD Team
Binance USD is a new cryptocurrency that has garnered much attention lately. The team behind this project is very experienced and has a good track record. This exchange is different from other exchanges because it allows you to trade directly with USD. This can be a great option for those looking to enter cryptocurrency.
Partnerships
Binance, one of the world’s largest cryptocurrency exchanges, has partnered with four U.S. dollar-backed stablecoins to broaden its offers and make buying cryptocurrencies easier.
Binance lists Gemini dollar (GUSD), Paxos Dollar (USDP), TrueUSD (TUSD), and USD Coin (USDC) Customers can exchange these coins on Binance and with each other.
Binance wants to break into the U.S. market and provide clients with additional options. Customers can acquire cryptocurrencies without worrying about price volatility with the four stablecoins.
Read more:
- Coinbase vs Binance: Which Crypto Exchange is Best?
- Binance Vs Kraken: Which Crypto Exchange Is Better For You in 2023
What Is BUSD Token?
BUSD is a U.S. dollar stablecoin launched by Binance and Paxos Trust. BUSD employs currency reserves to maintain a dollar price, like USDC and tether (USDT).
Basic Information About BUSD
BUSD is a dollar-pegged stablecoin. Each BUSD crypto is backed by 1 USD, so it’s always worth 1 USD. Paxos Trust Company issues and regulates BUSD.
The BUSD coin was created to provide a stablecoin that could be used in cryptocurrency trading and make it easier for people to hold and use cryptocurrency without worrying about price volatility.
The BUSD stablecoin is available on several exchanges, including Binance, Huobi, and Kucoin.
Market Capitalization
The current Binance USD price is $1, with a $6,219,564,778 24-hour trading volume. It has a total quantity of 17.8 billion coins and a circulating supply of 18 billion BUSD tokens.
How Is BUSD Backed?
Binance USD is a leading stablecoin, backed 100% by actual cash and cash equivalents held in different FDIC-insured bank accounts. Paxos, a leading New York-based blockchain-focused financial institution, manages these reserves. BUSD is also one of the few stablecoins that provide monthly audited reports of its reserves, allowing users to independently verify the consistency of its supply and USD reserves at specific periods.
Types Of BUSD On Blockchains
The BUSD stablecoin is an ERC-20 token that runs on the Ethereum blockchain. Additionally, Binance supports the BEP-2 and BEP-20 token standards for transactions on the Binance Smart Chain and Binance Chain blockchains using a Binance-Peg version of BUSD (not produced by Paxos).
Read more: BEP2 vs BEP20 vs ERC20: Which Is The Best Choice For You 2023?
How to Buy BUSD?
Create a Binance website or app account.
Your Binance account lets you buy crypto. You must authenticate your identity before buying Binance USD (BUSD).
- Create a free account on the Binance website or app.
- Buy your first BUSD buy credit card or P2P on the main menu.
- Store or use Binance USD (BUSD) on Binance.
How to Store BUSD Coins?
Since Binance USD (BUSD) runs on the Ethereum network (ERC-20), any wallet that supports ETH can be used to store it.
On Ledger and Trezor, there are instructions for managing ERC-20 tokens that are not officially supported. Connecting your Ledger or Trezor to MyEtherWallet or MyCrypto is required.
After buying coins, you can keep them on exchanges, but we advise utilizing a dedicated wallet for security and long-term storage. The most secure wallets are hardware ones, but they are expensive. They are the ideal option for individuals holding a lot of value or planning to store for a while.
Read more: Hot Wallet Vs Cold Wallet: Which One You Should Choose For Your Crypto 2023?
What Are The Risks Involving In BUSD?
By Cove Markets, Binance USD is low risk. Using volume and market capitalization, a proprietary scoring algorithm determines how much money was needed to shift the price over the previous 24 hours to determine if a cryptocurrency can be easily manipulated by sparse trading activity. On a 0 to 100 scale, low scores indicate high danger and high scores indicate minimal risk.
What If BUSD Collapses?
A stablecoin backed by the US dollar is called BUSD. As a result, it faces the same dangers as the US dollar. BUSD would probably decline as well if the US dollar did.
The Crash of UST and its Impact on BUSD
When UST crashed, people immediately thought of USDT, and its market cap dropped by more than $10 billion to $72.5 billion over half a month.
There are a lot of stablecoins that have lost their pegs as a result of the incident. Only BUSD, USDC DAI are still holding the peg and are not affected too much (domino effect).
Advantages and Disadvantages
Here are some pros and cons of Binance USD (BUSD):
PROS
- BUSD is a fiat-collateralized Stablecoin fully backed by fiat currency and equivalent assets. The Peg holding mechanism of this stablecoin is simple, stable, and easy to operate under bad market conditions.
- BUSD is the main application in the Binance ecosystem. Binance is considered one of the biggest ecosystems today, it includes Binance exchange, BSC… Because it is “favored” to use in related ecosystems of Binance, it is fast. BUSD’s growth rate is extremely fast.
CONS
- The biggest risk of fiat-collateralized stablecoins is in the “decentralization” aspect. In the case of BUSD, they require off-chain reserves. A small number of custodians manage funds. Users will have to trust these custodians to act honestly.
- Additionally, fiat-collateralized stablecoins have the right to blacklist an address rendering these wallets inoperable with that stablecoin. This strategy is useful in freezing the funds of hacker wallets, making it impossible for them to transfer hacked victims’ funds. Still, on the other hand, they show the power of these organizations to govern who may and may not interact with their stablecoins.
FAQs
Why BUSD instead of USD?
A stablecoin that is linked to the US dollar is called BUSD. As a result, 1 BUSD is always equivalent to 1 USD. The native currency of the Binance DEX is BUSD, which is also utilized on the BEP2.
How to earn BUSD cryptocurrency?
There are a few ways to earn BUSD. You can buy them directly from a cryptocurrency exchange, earn them through a loyalty or rewards program, or receive them as payment for goods or services.
Why is Binance USD popular?
There are a few ways to earn token BUSD. You can buy them directly from a cryptocurrency exchange, earn them through a loyalty or rewards program, or receive them as payment for goods or services.
What can I buy with BUSD?
BUSD is currently listed on various exchanges and can be used to purchase various assets, including BTC, ETH, and other cryptocurrencies.
Read more: Difference Between WETH Vs ETH 2023? And What Is Wrapped Ether (WETH)?
How can I find more information about Binance USD?
The best way to find more information about Binance USD is to search for it online. Many websites will provide you with information about this cryptocurrency. You can also find information about this coin in various forums and chat rooms.
Conclusion
Above is the latest information about Binance USD and BUSD. How do you rate this project? Please comment below to discuss with Covemarkets!
Disclaimer: The information provided in this article is not investment advice from Cove Markets. Cryptocurrency investment activities are yet to be recognized and protected by the laws in some countries. Cryptocurrencies always contain financial risks.
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