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Is BNB Coin Eco Friendly? (Explained)

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Cryptocurrencies are part of that growing conversation as detractors constantly point out that a majority of these digital assets are polluting the environment in one way or the other.

In this guide, we’ll focus on the eco-friendliness of Binance Coin (BNB), the native platform token of Binance cryptocurrency exchange.

Is BNB coin eco-friendly?

Binance Coin (BNB) is eco-friendly, although it didn’t start this way. Initially, BNB was created as a token hosted on the popular Ethereum network, the leading smart contract platform.

Ethereum is the second-largest blockchain network after Bitcoin that still uses the Proof of Work (PoW) consensus mechanism, which has been criticized for wasting resources.

Essentially, PoW incentivizes transaction validators and block generators (miners) to compete by solving hard mathematical puzzles for a reward.

The more powerful a computer, the higher the chances of solving the puzzles before the others.

Therefore, the miners invest in more powerful, advanced, and (often) energy-consuming machines to help them win these rewards. This process is energy-inefficient and unsustainable.

In September 2020, Binance launched the Binance Smart Chain (BSC), an Ethereum competitor with the same features and functionalities. Binance made a major change to the consensus mechanism, where it opted for Proof of Staked Authority as opposed to mining.

Shortly after launching the BSC, Binance converted the platform token BNB from an ERC-20 token based on the Ethereum network to a BEP-20 token on the BSC.

Also read: Is Terra Luna Environmentally Friendly?

How Does Proof of Staked Authority Work?

PoSA is an energy-efficient consensus mechanism, and here’s how it works:

Binance verifies a select number of transaction validators with a minimum stakeholding in the BNB asset.

The minimum investment in operating a validator node is intentionally high to incentivize good behavior from the operators.

Staking, in any form, makes a blockchain more scalable and cheap to perform transactions, and PoSA is no different.

Since Binance preselects validators, there is no competition between these players to earn the right to create blocks. Additionally, unlike Bitcoin or Ethereum, which have inflationary coins, BNB is deflationary.

All BNB tokens were created and distributed during the Binance ICO, so there is no incentive to compete for newly minted tokens.

These two reasons make PoSA a more energy-efficient consensus mechanism and, by extension, the tokens that run on top of its smart contract layer, including BNB.

What is BNB used for?

Binance is a leading digital asset trading platform that began operations in 2017 and quickly gained traction.

It’s now the largest crypto exchange by daily trading volume and BNB has grown to become one of the most valuable blockchain assets.

BNB was created as a utility token for early Binance investors to claim discounts on the exchange. However, with time, the coin has found ever-increasing uses as the ecosystem expands.

Here is a list of some of BNB’s applications:

  • Claim a 25% discount on spot trades on the main exchange platform;
  • Staked on the BSC and Binance Chain blockchains;
  • Invest in early-stage crypto projects on the Binance Launchpad;
  • Value transfer across the Binance ecosystem;
  • Make BNB payments offline through e-commerce integrations with the Binance Pay feature;
  • A speculative asset by traders and investors alike.

What is the impact of BNB on the environment?

BNB is an eco-friendly crypto asset with minimal negative effects on the environment. It runs on the Binance Smart Chain, which uses staking as a consensus mechanism instead of mining.

Because they stake BNB coins, transaction validators aren’t required to prove that they have ‘worked’ to be rewarded. Instead, the stake is used to incentivize good behavior.

This entire process is extremely energy-efficient. The only impact it has on the environment is that it contributes to global energy usage.

What are the pros of BNB?

  • The coin is eco-friendly as it’s based on the energy-efficient Binance Smart Chain;
  • Binance Coin has massive utility within the vast Binance ecosystem;
  • Binance is the largest exchange with the widest geographical reach, making BNB easily accessible;
  • BNB is widely supported on most cryptocurrency wallets.

What are the cons of BNB?

  • BNB is Binance’s native platform token and therefore isn’t listed in many competing exchanges;
  • The coin is highly centralized as its supply and circulation are managed by a central authority.

Is BNB a good eco-friendly alternative to Bitcoin?

Binance Coin (BNB) is an excellent alternative to the flagship cryptocurrency – Bitcoin, because its host network, the BSC, uses an energy-efficient consensus mechanism.

Bitcoin was the first to solve the double-spend problem in 2009, but ever since its launch, there have been innovations in that area.

A popular alternative to cryptocurrency mining mechanism is staking, which is what Binance Smart Chain uses. Staking helps BSC scale better than Bitcoin and leads to cheaper transactions.

But, just as importantly, staking enables the network to use less energy and lead to a lower carbon footprint.

Also read: Is Cardano eco-friendly?

Is blockchain technology better for the environment?

Some blockchain solutions such proof-of-work spend a lot of energy and thus contribute to high levels of carbon emissions. However, other networks use more eco-friendly consensus mechanisms that have little to no negative on the environment.

A few blockchain proponents, especially those arguing for the importance of PoW algorithms, say that mining has contributed to the increasing use of renewable sources of energy.

Final thoughts

Binance Coin (BNB) is a popular digital asset available on one of the largest crypto trading platforms. Chief among its benefits is that the coin is cheap to use, has fast confirmation fast times, and is eco-friendly, making it a great asset to include in any crypto investors’ portfolio.