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Binance holds the largest trade volume for any exchange on the cryptocurrency market. Due to its ambitions for growth, the exchange is now accompanied by its native dual blockchain network.
Binance Chain (BC) was launched in 2019 and was developed for the decentralised high-volume exchange of cryptocurrency assets. Binance Smart Chain (BSC), which launched in 2020, runs in parallel with BC but allows for smart contract functionality and integration with the Ethereum network
Binance Coin, or BNB, which started as an ERC-20 (Ethereum-based) utility token for the exchange in 2017, migrated to the BC network and now powers the native blockchains. The increased usage of the exchange and increased development on the native blockchain networks is why BNB is currently one of the most valuable coins on the market.
The BNB token is used to pay trading and transaction fees, earn rewards through Binance Earn and stake in the BSC network.
Outside of the Binance ecosystem, holders can earn yield on BNB through centralised lending services, utilise yield farming opportunities and even use it for real-world purchases, such as booking flights on Travala.
This guide will explore the various ways you can use BNB tokens to earn rewards.
Staking is the process of locking up cryptocurrency tokens to help secure and run a blockchain network.
Funds that are deposited are used to help operate and secure the network, ensuring efficient transactions and economic viability. Users that stake cryptocurrencies typically accrue additional tokens to incentivise locking their assets. The BNB token can be staked on the Binance Smart Chain blockchain in return for rewards.
The BSC blockchain uses a proof-of-staked-authority (PoSA) consensus mechanism. Unlike Bitcoin, which uses a proof-of-work model to validate transactions, the BSC is updated and operated by 21 validators. The validators process transactions in the chain by locking up (staking) BNB tokens. However, the validators must also be elected every 24 hours by delegators. Delegators are all other members that have staked BNB tokens.
When it comes to staking BNB, there are two ways to earn rewards: as a validator or as a delegator.
Validators on the BSC network power the blockchain through processing transactions. Validators then receive BNB tokens as a reward. While this sounds appealing, becoming a validator is difficult as it requires both capital and technical expertise. It is often best performed by users with larger BNB holdings and advanced technological expertise.
A validator on the BNB network needs to do the following:
As you can see, BNB staking as a validator is a pretty daunting task. Luckily, for the passive cryptocurrency investor looking to stake BNB tokens, becoming a delegator is an easier option.
Delegators offer validators their BNB tokens via a supported wallet or crypto exchange. By offering BNB tokens, they help their chosen validator become elected as one of the top 21 candidates. Once a validator enters the top 21, they can start contributing to the operation of the BSC. Staking rewards are then distributed to validators and then proportionally redistributed among delegators, depending on the number of tokens invested in the validator.
Staking on an exchange makes the process very simple. The exchange will operate as the validator and will complete all of the technical work for you. This means you don't have to worry about researching and selecting a suitable validator. The Binance exchange charges no staking fees, which is a bonus.
Though it makes sense to stake BNB on the native Binance exchange, there are other exchanges where you can stake Binance Coin, including PancakeSwap.
Staking Binance Coin on the Binance exchange is very straightforward:
Staked BNB can be withdrawn or traded at any time by clicking "Redeem earlier" after navigating to your staked orders. This can be accessed via Wallet > Earn.
Staking BNB through a cryptocurrency wallet is a relatively easy process and is supported by a number of platforms, including Trust Wallet or Binance Chain Wallet.
Though a little more complex and expensive than staking through an exchange, it offers more flexibility to the user in terms of security and validator selection.
The minimum number of BNB tokens that can be staked varies from wallet to wallet, but it is usually at least 1. Withdrawing BNB from a wallet will take 7 days.
How to stake BNB with Trust Wallet:
You can unstake at any time by going into Binance Coin's menu in the digital wallet and selecting "unstake".Back to top
Outside of staking, BNB token holders can earn yield on their investments through a centralised lending service such as Crypto.com or Nexo. These platforms will pay yield on coins stored in their framework. Getting started is again relatively easy. Create an account with the desired service provider and deposit the minimum required BNB. Before long, you could be earning an impressive APY on your otherwise idle BNB assets.
Users can earn BNB rewards by providing liquidity to certain DeFi protocols, such as the PancakeSwap decentralised exchange (DEX).
A DEX utilises an automated market maker (algorithm) alongside user-deposited liquidity to provide instant trades between cryptocurrencies. To incentivise the provision of liquidity, PancakeSwap offers liquidity providers rewards in the form of additional tokens and a share of transaction fees.
The Binance exchange offers a similar option and provides BNB token holders with the ability to provide liquidity and capitalise on their holdings.
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The amount of yield that users receive on staking Binance Coin depends on the following factors:
Delegators that stake BNB can expect to earn approximately 9–11% APY (excluding commission and gas fees) based on Binance's Fixed Staking option. In comparison, returns from yield farming can vary wildly, ranging from less than 1% to over 100%. Remember though that all these returns are variable, and yield farming is especially volatile and carries additional risks.
Real-world earnings will ultimately depend on the market value of the BNB token. If the price of BNB rises, rewards will increase proportionally. If the price of BNB drops, it could eat into profits.Back to top
Staking BNB is a relatively simple and safe process. However, like any investment, there are certain risks that must be assessed before locking your money in a wallet or exchange.
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