What is Binance USD (BUSD)?
Binance USD or BUSD is a stablecoin pegged to the US dollar and is generally traded at a 1:1 rate. According to Binance, every BUSD is backed by an actual dollar that is kept in federal-insured US banks or Treasury Bills.
It is the creation of crypto exchange giant Binance and stablecoin and securities expert Paxos. BUSD is known as one of the most liquid, regulated stablecoins on the market. It aims to provide stability to the crypto market and support the use of blockchain technology as a whole.
The collaboration between two well-known entities means the stablecoin is seen as one of the more transparent options on the market. Many investors prefer BUSD to other USD stablecoins, which have less transparency.
The US Office of the Comptroller of the Currency has approved legal stablecoins as a means of bank payments, which reinforces BUSD’s importance as a regulated stablecoin.
BUSD was designed as an ERC-20 token that works on the Ethereum blockchain and could be bought and sold as a normal token of its kind. From a technical perspective, BUSD isn’t a new idea, but it is a very transparent option for people that want to hold tokenized USD.
What is the Purpose of Binance USD (BUSD)
BUSD is built on existing uses of a normal stablecoin. With Paxos’ efficiency, Binance’s integrity, and the US government’s approval, it remains one of the best ways to make tokenized USD payments.
Almost any stablecoin allows users to quickly transfer their crypto assets into USD value without the hurdles of entering the fiat system, which will take time and will likely be far more expensive than using a standard stablecoin like BUSD.
What Problem Does BUSD Solve?
BUSD is Binance’s solution to the instability of the crypto market, as an actual dollar backs it. Most people use fiat currency to measure the value of tokens, and BUSD acts as that standard measure of value within the crypto ecosystem.
Furthermore, as an ERC-20 token, it can also be used to settle payments and for other commercial purposes. US regulations allow BUSD to be accepted in banks and other financial institutions, which may spur further use of the token.
BUSD differs from other stablecoins that don’t operate on the Ethereum blockchain. Due to this, the price to transfer BUSD may be higher, as gas fees on the ETH blockchain can be higher than other options.
When on the Binance platform, any conversion regarding BUSD is virtually gasless, giving investors control over how their value is stored and at very cost.
How Does Binance USD (BUSD) Work?
Stablecoins have different methods to maintain a peg – either via collateral like fiat, assets, cryptos, or some other form of value. It can be sent to any ETH wallet and is like any other ERC 20 token.
Every BUSD is pegged to a fiat USD which Paxos holds in a federal-insured account which makes the token a reliable form of the digital US dollar. BUSD is transparent as it publishes its audits in its monthly attestations reports, and the peg has not been broken once.
The collaboration between the two companies makes Paxos the custodian and issuer of BUSD, while Binance provides one of the main platforms for investors to obtain the crypto. BUSD is freely available and can be bought at any time.
The value of BUSD is fully recognized as the basis of measurement in the Binance ecosystem. There is no gas fee whatsoever within Binance, and there are roughly 97 trading pairs on Binance’s exchange.