The beauty of being a completely neutral professional in this field is that it allows me to discuss everything without any fanaticism or rejection. I admire the work, talent, and tremendous innovation that is being built, as everything adds value, especially when fighting against the status quo. For that reason (always through an objective analysis), today I am writing about Binance and its latest announcement/launch, a new layer 2 blockchain called OPBNB.
Without delving into too many technicalities, the solution sought with this new blockchain is to improve network scalability, meaning that transactions can be executed faster, but above all, that the fees are much cheaper (the operational cost on the Binance network per transaction is 0.25 – 0.5 cents, plus slippage, plus the invariant of each pool). It is now expected that network fees will be reduced to practically zero, which is the natural trend for the cost of accessing money within a blockchain, due to the lack of intermediaries.
To achieve this, they will use Optimism Roll-Ups technology, a technology already used by other layer 2 solutions such as Arbitrum, with the slight difference that on the OPBNB network, fees will still be paid with the BNB coin and not with ETH. To avoid confusion at this point, a little general knowledge:
In most blockchains, all transactions made are executed and processed within the same blockchain. However, with Optimism Roll-Ups, what we achieve is sending all transactions off-chain, meaning they are processed and executed outside the blockchain. This avoids congestion and increases scalability, resulting in much faster and extremely cheap transactions.
From the DeFi perspective, this will make us much more profitable with our investments, even with a small amount of money (in a year, an active investor can spend between $500 and $700 in fees on the Binance Smart Chain), as it is advisable to apply compound interest as a rule in all our strategies, due to the cost of 0 for the operations.
The other important improvement is for BNB holders, as all of this will lead to a considerable increase in the demand for BNB (a deflationary coin) and consequently an increase in its price. If we think about it objectively and analytically, the following can be observed:
1.The BSC network is currently the third-largest in terms of total value locked (invested within the network).
2. It is the most widely used network, meaning it has the most active users.
3. It is the network where the most transactions take place.
4. Its growth trajectory is the largest of all, thanks to being the preferred choice for retail investors.
Here is where the bombshell comes in and the real race to secure the top positions as the favorite network for both developers and users. In other sectors, I dare say that all these efforts and investments within the company are geared towards gaming, NFTs, and decentralized social networks. We all know that these three sectors, in order to operate properly, need a highly scalable and cost-effective network. Thinking aloud, “If I am going to launch a video game where players need to perform hundreds of transactions in seconds or minutes, I will need a network that can execute transactions in milliseconds and where I hardly have to pay any fees.” In other words, no one should know or notice that it is being done on a blockchain.
We need to pay close attention to Binance’s incubator to see what is being developed, which projects are the first to land, as they will set trends and have a network effect, capitalization, usability, and recognition within the sector. Undoubtedly, the honey effect is guaranteed, and new investors will arrive directly or indirectly to buy BNB, first to pay network fees and second because it will always be the primary currency used in all operational projects/games/DeFi/metaverses.
Earlier, I mentioned that BNB is deflationary, meaning that no new coins will ever be issued to the market. However, on the other hand, BNB is gradually being burned (the maximum supply of BNB was 200 million, and currently, 157 million are in circulation) with the goal of eventually reducing the supply to 100 million. It’s important to note that we’re talking about a utility coin with significant usefulness as the coin of the largest exchange in the sector, and without competition.
It is true that Binance is a centralized company, with regulatory issues looming heavily over its head, and with the attacks it is facing, we must be cautious in our message and expectations. Additionally, if we are aware that the burning of BNB coins comes from the fees charged by the blockchain, by drastically reducing the fees that will be paid, the burning rate will also decrease. Therefore, it will take much longer to reduce the total supply of BNB to 100 million tokens.
In conclusion, despite all the negative news we hear, I see Binance as strong and solvent (this will be its most demanding test, facing the SEC), with BNB comfortably sitting around $220 even in difficult times. Therefore, if market cycles are followed, we will have a couple of exciting years ahead to see how OPBNB gives it the definitive boost that propels it towards the psychological barrier of $1,000. On the other hand, if any fraud with customer funds is detected, the full weight of the law may come down on them.