Binance has announced that they would be launching their own version of bitcoin, which would be a token backed by Bitcoin. This pegged token is one of the many to come, others of which would be pegged to other leading currencies like ETH and LTC. Officially announcing the token publicly, Binance tweeted:
Which other tokens would you like pegged on Binance chain?https://t.co/aohKP8cRhf
— Binance (@binance) June 17, 2019
The question at the end signals towards Binance’s intentions at launching other tokens, pegged to other leading cryptocurrencies.
According to their blog post, the currency would be called BTCB and would be on the native Binance chain, with BEP2 token format. The token would be available on the Binance DEX soon with a BTCB/BTC trading pair and with a nominal fee, a price spread of 0.1%. Binance assures that the coin would always have a 100% backing. In their blog, they state:
The sum of the buy order and the funds on the published reserve address will be bigger than the total supply of the pegged token, ensuring there is always 100% backing.
This benefits Binance as it increases the number of currencies on the native Binance chain and since people trust Binance with their money, there would be natural adoption and the utility of Binance’s DEX would increase. They have reserved 9001 BTCs and minted the same number of BTCBs. Dropping a Dragon Ball Z reference while hinting at the amount of BTCs in the reserve, CZ (Changpeng Zhao) tweeted:
It’s over 9000! https://t.co/vauQtRzWeL
— CZ Binance (@cz_binance) June 17, 2019
Binance isn’t the only one running the race of crypto pegged tokens. Ethereum previously introduced a token named Wrapped Bitcoin which also had a 1:1 peg with BTC. The graphs of Coin Market Cap show that the token has been successfully maintaining the peg with the leading currency.
The yellow line shows the stable peg to BTC. The main purpose of an ERC20 token for BTC (WBTC) was to utilize the network characteristics of Ethereum while maintaining the value of BTC. For example, Ethereum provides much faster transaction times than BTC. Similarly, Binance also attracts users by giving fast network speeds tied with a low transaction fee.
Binance has a good history of their well-performing cryptocurrency BNB. The BEP2 token has surpassed a number of leading cryptocurrencies and currently stands at number 7 in the overall cryptocurrencies with a constant positive growth rate. BNB is currently being traded at $33.92 with a market cap of $4.7 billion.
Binance has started moving towards being a crypto institution more than just an exchange as their projects for the flourishment and adoption of crypto recently have faced an intense push. Before the news of multiple crypto pegged coins breaking in the market, Binance announced the partnership with BAM, a US-based trading platform, to open a new platform for the US-based users. The founder, CZ, is also very keen on taking the DEX to new heights. As for the Bitcoin pegged token: is there really a need for another BTC?
We’ve already had currencies pegged to USD, like Tether, or to other fiat currencies which serve a brilliant purpose of maintaining the 1:1 peg while serving to be as digital as they can get. These type of cryptocurrencies have pushed the general public to think of crypto more like a currency rather than a store of value, like gold. Putting forward the other side of the picture, Martin D. Wiess, founder of Wiess Ratings stated:
“Cryptocurrencies like Bitcoin live in a separate financial system, which holds the promise of becoming a more solid foundation than what the financial system offers today. In contrast, stablecoins live on a layer that’s built atop today’s hyper-leveraged system, still vulnerable to breakdowns and debt crises. Cryptocurrencies hold the promise of a world where pure, native digital assets held by the masses are the foundation of a new — and more robust — global financial system. Stablecoins will have no place in that world.”
Now, if the pegged currency isn’t really pegged to fiat, but another cryptocurrency, like BTC, it serves a number of purposes as stated below:
- It doesn’t alter or take away from the original supply of BTC
- Strips away the speed issues and transactional fee issues of BTC
As long as new crypto pegged cryptos are being made, which promise better speeds and low transactional costs, it serves to be a better alternative to the original currency.