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BUSD
What is Binance USD_
Cryptocurrency
25.11.2021
Updated 23.12.2021
13:48

Stable cryptocurrencies (stablecoins) are a real trend of the last few years. The fact their price is pegged to the dollar, another fiat, or precious metals makes these assets a versatile tool for reallocation, protection of investments, and simplification of trading generally. In this article, we will discuss one of the most demanded stablecoins — BUSD.

What BUSD is

Binance USD (BUSD) is a stable cryptocurrency, the price tag of which is backed by the US dollar. It means that for 1 BUSD, during the purchase or sale, 1 dollar is always given. Or it may be a market price that differs from the standard dollar by just only tenths of a cent to one or another side. Such low volatility is the best what the cryptocurrency market can offer now: particularly for those who want to keep the dollar equivalent of their investments.

Binance USD (BUSD) is a reliable stablecoin, which received approval from the New York State Department of Financial Services (the USA). The coin was developed in cooperation between the Binance cryptocurrency exchange and the Paxos project. It is applied in many currency pairs both on Binance and other exchanges.

The reputational advantage of BUSD is that the coin is 100% ensured by the United States dollar in accounts of leading banks of the US. In addition to that, the whole volume of stablecoins in this very country is ensured through the Federal Deposit Insurance Corporation (FDIC).

A certified auditor company works on financial control of the emission (the fact that every BUSD token in circulation is backed by the US dollar unit in the account in the bank). It is responsible for monthly approval of conformity of the number of circulated BUSD and collateral USD.

The main parameters of BUSD as for now:

Brief history of creation 

The creation of Binance USD (BUSD) is a joint initiative between the exchange of the same name and Paxos company. After the token launch in 2019, companies strived to implement a reliable stablecoin that would perform its significant role within Binance, the ecosystem of trading operations.

Paxos Trust released BUSD on the basis of White Label. The development was fully taken by specialists of this company, but the token was added to circulation under the customer’s trademark.

White Label Cryptocurrency is a ready-to-use software solution that the customer receives from the manufacturer under the contract based on subscription. The customer itself that the brand is registered to either takes part in programming minimally or does not participate in it at all. Thus, the main effort is put on marketing, promotion, and sales, which allows to get much better results compared to what could be expected during single work on all nuances of asset creation.

The statistics published 12 months after the launch is pretty illustrative in this regard:

Main advantages of Binance USD

The advantages of Binance USD are the main features of the token that allowed it to be among the most demanded stablecoins. The great part of BUSD’s success is due to the popularity of the Binance cryptocurrency exchange. Nevertheless, some other factors triggered the growth of investments into the token and its use in trading operations.

Fiat ensuring 

The American company Paxos Trust implements the emission of Binance USD by depositing dollars to its banking accounts. Everything goes this way:

The fact that there is a reverse procedure will also surprise potential investors. Every time a company wants to withdraw some sum from this account, it will have to collect the corresponding number of BUSD and burn them. Otherwise, it will not be allowed to withdraw fiat USD.

Tether coins (USDT) follow the same principle. Being the first and the most popular stablecoin, it is the key competitor to BUSD. Both coins strive for unconditional leadership among stablecoins pegged to the US dollar.

Safety and stability 

Such parameters like safety and stability of the BUSD stablecoin are guaranteed by its:

The above factors and stability (that is achieved through harsh linkage to the dollar and its amount in banks) create one of the most secure and problem-free cryptocurrencies in the market.

Integration with Binance crypto exchange 

One of the main advantages of the Binance USD token (BUSD) is its integration with the largest crypto exchange Binance, which contributes to a number of extra possibilities and use scenarios for holders of the asset:

The affiliation with the Binance crypto exchange makes this stablecoin one of the most technological, functional, and convenient assets in the blockchain field. This is where Tether coin can learn from BUSD.

Diversity of blockchains

Developers of the BUSD cryptocurrency added support of as many as three blockchains for their asset:

BUSD based on any of the three standards can be used by various categories of users depending on their needs and goals:

  1. BUSD of ERC-20 standard (Ethereum blockchain) suits fans of decentralized opportunities based on this cryptocurrency and its blockchain.
  2. BUSD of Binance Chain blockchain (BEP-2 and BEP-8 standards) is an initial option, which not long ago was offered as a single alternative of BUSD ERC-20 with faster operations (the transfer requires one confirmation of the network) and low fee (so you can save ten times more in contrast to the Ethereum network).
  3. BUSD of Binance Smart Chain blockchain (BEP-20 standard) is a choice for fans of innovations and amazing opportunities, which has replaced the already outdated BSC. These coins are developed as an alternative to BUSD ERC-20 and BUSD BEP-2/BEP-8, striving to even lower fees as well as allowing to work with automated swaps and smart contracts.

It is worth mentioning that the available diversity still loses to what USDT offers with its incredible number of blockchains. Besides, the lack of fully free transfer of the stablecoin, which Tether version linked to Tron blockchain has, does not make users happy.

Investment potential of BUSD 

The investment potential of the BUSD token is ensured by activities, promotions, and special offers launched by the Binance exchange. From time to time, the trading platform offers:

<Also, we should pay attention that together with BUSD, such features are launched:

  1. Deposit mechanisms of earnings.
  2. DeFi staking.
  3. 2-Currency investments into investment plans.
  4. Pools of liquidity.

But all of that does not have profitability that would be well predicted. Most often, benefits from investments into BUSD can get those who are engaged in trading on a regular basis, implement various strategies, and fix income without withdrawing it into fiat.

Trading potential 

The trading potential of BUSD is most often implemented at the Binance exchange. But despite the fact people got used to associate the use of this cryptocurrency with this ‘mother platform’ specifically, it has pretty good trading volumes on third-party websites. For example, LocalTrade cryptocurrency exchange has proven nicely in that regard. It has a lower number of deals than Binance has but allows to get more profitable and faster possibilities for earning at such pairs like BTC/BUSD.

BUSD in pairs with the main cryptocurrencies (BTC, ETH, XRP, LTC, and others) create pretty good markets, but their volumes still remain lower compared to the same pairs with USDT. It is also noted that the spread in such situations is significantly wider.

But such characteristics allow to conveniently use limit orders with futures at the edges of the spread to eventually fix profit on a difference between the purchase and sale rates.

Conclusions

The BUSD token is a less popular but more technological competitor of USDT. Its use is convenient when an alternative to its main competitor is required or when there are limitations in the region where a trader/investor is.

Also, we must point out payment features of Binance USD, which allow applying it as a full-fledged payment tool in those countries where Binance Pay and Binance Card are not available.

Thanks to this, such stablecoin maximally erases the distinction between the cryptocurrency economy and its classical analog.

Preguntas más frecuentes

Binance USD (BUSD) is a stable cryptocurrency, the price tag of which is backed by the US dollar. It means that for 1 BUSD, during the purchase or sale, 1 dollar is always given.

Developers of the BUSD cryptocurrency added support of as many as three blockchains for their asset:

  • Ethereum;
  • Binance Chain;
  • Binance Smart Chain.