About Binance USD
Binance USD (BUSD) is a stablecoin created by the partnership between the most popular cryptocurrency exchange Binance and the blockchain infrastructure company Paxos Trust. This stablecoin was launched in 2019 and its value is pegged 1:1 to the US dollar.
Unlike other cryptocurrencies, BUSD is backed by US dollars held in reserve, which ensures its stability and offers a safe investment option for traders and investors looking to avoid the volatility of the digital asset market. BUSD is one of the few regulated crypto tokens available in the market, having received approval from the New York Department of Financial Services, a notoriously strict regulatory body.
Binance was able to obtain this regulatory approval by partnering with Paxos which has a strong record of compliance with the NYDFS. Paxos is the issuer of BUSD, not Binance, and it follows the rules set for FDIC-insured Trust Companies, including monthly audits of the bank reserves by an accredited accounting firm.
BUSD is an ERC20 token built on the Ethereum blockchain, but it also supports BEP-2, a technical standard that defines how new digital assets can be created and transferred on the Binance Chain.
The Binance Chain is a blockchain platform developed by Binance that offers interoperability between its native chain and the most popular smart contract platform, providing users with a wide range of options when it comes to digital assets. BUSD is widely accepted by many wallets and lending platforms, which supports its broad adoption.
Binance USD Price
Binance USD (BUSD) has become one of the most successful stablecoins in the cryptocurrency market since its launch in 2019. At the beginning of 2021, BUSD had a market capitalization of almost $1 billion. However, the BUSD ecosystem has witnessed tremendous growth throughout the year, and by the end of 2021, its market capitalization had surged to over $14 billion. BUSD's market capitalization now stands at roughly $6 billion, making it one of the top stablecoins in the market. The current BUSD 24-hour trading volume is about $3.22 billion. BUSD's circulating supply amounts to 6.66 billion coins, with the maximum supply remaining undisclosed.
How does Binance USD work?
As mentioned earlier, BUSD is a stablecoin that is backed by fiat currency, specifically the US dollar. Binance and Paxos, along with major banks, have created a reserve of US dollars to back every BUSD in circulation, ensuring that the supply and reserves are always at a 1:1 ratio. Paxos holds the US dollar reserves to back BUSD tokens, and it acts as a custodian for BUSD.
Each BUSD token can be exchanged for one US dollar from the reserves, which means that BUSD is fully redeemable for US dollars. If the price of BUSD starts to fall below $1, arbitrage traders will purchase large amounts of BUSD to make a profit, which will increase demand and raise the token price back up to $1.
BUSD is an ERC-20 token, which means it can be stored in popular Ethereum wallets such as MetaMask and Exodus. This allows users to transact on decentralized marketplaces on Ethereum without converting US dollars into ETH.
Binance is responsible for managing the BUSD token, which includes listing it on their exchanges and providing customer support. They also use smart contracts to mint and burn BUSD tokens as needed. Binance uses a deflationary mechanism to maintain BUSD's 1:1 peg to the US dollar. When BUSD is bought, the equivalent amount is added to the Paxos treasury, and when BUSD is sold, the equivalent amount is taken from the treasury, and the BUSD is burned.
Additionally, the BUSD token is compatible with both Ethereum's ERC-20 standard and Binance's BEP-2 standard, which allows users to move their BUSD seamlessly between the two blockchains using Binance's Convert function.
The New York state regulators have imposed several regulatory measures that BUSD, must comply with. They require that BUSD is fully collateralized and that its creation and burning are strictly controlled by Paxos. In order to prevent illegal activity, Paxos also has the authority to freeze accounts and remove funds. All of these regulations are in accordance with the Trust Charter and New York banking laws that are applicable to BUSD.
The smart contracts used for BUSD contain a new function called SetLawEnforcementRole, which enables Paxos to implement the aforementioned regulations in order to uphold NYDFS standards.
It is important to note that these regulations only apply to Paxos-issued BUSD on Ethereum. BUSD issued by Binance on BNB Chain (previously known as Binance Chain and BNB Smart Chain) is not regulated by the NYDFS or issued by Paxos.
What is Binance USD used for?
BUSD offer a range of benefits and use cases for crypto investors and traders, thanks to their stability. In volatile markets, stablecoins can serve as a reliable store of value, much like traditional fiat or securities. They also provide an easy way for investors to lock in gains without having to convert to fiat and wait for funds to transfer to their bank accounts.
BUSD can be used for various transactions, payments, and settlements, as well as in the world of DeFi. Users can easily transfer BUSD anywhere in minutes, with low cost and on the blockchain. BUSD can be traded on different exchanges and DEX, and it can also be deposited to earn an interest rate.
Moreover, BUSD can be used as payment for goods and services, as well as a collateral and loan asset. BUSD can be used as cross-collateral in futures, and it can be stored on an exchange or in a wallet.
Additionally, BUSD are popular on various networks and automated market makers, providing arbitrage opportunities when prices differ between different exchanges. As BUSD exists on the Ethereum network, it can be integrated with any of the Ethereum-based dApps and smart contracts.
Management
Binance was founded by Changpeng Zhao or "CZ". With years of experience in the blockchain industry, CZ has played a pivotal role in developing and expanding Binance into the popular platform that it is today.
Paxos has a team of experts on its board of directors, including Sheila Bair, former Chairperson of the Federal Deposit Insurance Corporation (FDIC), Bill Bradley, a former senator and Chairman of the Senate Finance Committee, and Patricia Kemp of Oak Investment Partners.
Paxos' regulatory status sets it apart from many other blockchain infrastructure platforms, providing a level of trust and security for its users. The platform offers a range of products and services that are designed to facilitate and streamline blockchain-based transactions, including stablecoins, digital asset custody solutions, and settlement systems.
